"Apple's replacement wave is underestimated"! Damo expects more than 500 million iPhone shipments in

AI technology is expected to stimulate the "new wave", institutions optimistic about Apple sales growth prospects.

Today's U.S. stock market before the plate, Apple shares rose more than 2%. On the news, Morgan Stanley rated Apple as a preferred stock, the target price was raised from $216 to $273, compared to last Friday's closing price is still 18.4% upside.

On Monday, JPMorgan analyst Erik Woodring issued a report saying that the Apple Intelligence feature will be a "notable catalyst" for a multi-year upgrade cycle for Apple devices, saying:

"We have previously underestimated the importance of the upcoming upgrade cycle, and the market continues to underestimate this at this time as well."

"We believe record levels of pent-up demand will be unleashed on the iPhone 16 range later this year, and at WWDC Apple debuted Apple Intelligence, reinforcing our belief that FY2025 could be the start of a multi-year device refresh cycle."

Benefiting from AI technology, Woodring expects Apple's average selling price (ASP) to grow at a 5% annualized rate, totaling $485 billion in revenue and $8.70 in earnings by fiscal 2026, beating consensus estimates by 7-9%, respectively.

Nearly 70% of shipments will be new models over the next two years

Morgan believes that the launch of Apple Intelligence technology will stimulate the potential "new" demand, thus starting a "multi-year upgrade cycle", driving shipments up strongly.

According to the report, since only the iPhone 15 Pro/Pro Max and newer models can support Apple's AI technology, it is expected to drive consumers to actively replace their iPhones with new ones, and promote the growth of iPhone ASP (average selling price).

Woodring forecasts that Apple will ship more than 500 million iPhones over the next two years, above the high 2021-2022 record. Shipments are expected to be 235 million units in fiscal 2025 and 262 million units in fiscal 2026.

Specifically, Big Mo expects 66-69% of iPhone shipments to be new models in FY25 and FY26, which is 2-6 percentage points higher than FY24 and 3 percentage points higher than the peak prior to FY22, driving annual iPhone ASP growth of 4-5%.

Woodring said that in addition to AI capabilities, the strong belief in the upgrade cycle is due to three factors that have never been seen before: an installed base of more than 1.3 billion devices, a longer upgrade cycle averaging 4.8 years, and the fact that newer technologies account for only 8% of the iPhone/iPad installed base.

Additionally, only 24% of iPads are currently supported to run Apple Intelligence, implying that the iPad is also likely to enter an upgrade cycle.

Just last week, Bank of America analysts Wamsi Mohan and others also issued a research report that expects generative AI to strengthen the willingness to replace iPhones with new ones this year, leading to strong sales growth and margin expansion, and raised Apple's price target from $230 to $256.

Apple launched Apple Intelligence function in June's WWDC, after the release of the company's shares once hit the first record high of the year, as of the close of trading on Friday, Apple's shares have accumulated 17%, more than the Nasdaq 100 index over the same period of 7% increase.