Tech is a wreck. So far in 2026, the technology sector is the second-worst-performing sector in the S&P 500 (^GSPC 0.39%). Apple (AAPL 0.87%), which ranks as the world’s second-largest technology company by market cap, is among the laggards. Shares of the iPhone maker are down more than 10% year to date.
However, Wall Street remains generally bullish about Apple. The consensus 12-month price target for the stock reflects an upside potential of around 20%. Roughly 60% of the analysts who cover Apple rate it as a “buy” or a “strong buy.”
At least one top Wall Street analyst believes that Apple is a screaming buy right now. Morgan Stanley‘s (MS 0.04%) Erik Woodring thinks the stock can jump almost 28% from its current level over the next 12 months. Why is Woodring so optimistic about Apple’s near-term prospects?
Image source: Getty Images.
Time for an upgrade
Morgan Stanley recently released its AlphaWise Global Smartphone Survey. And the results bode well for Apple’s growth in 2026 and into 2027. In particular, the Wall Street firm’s survey found that the number of consumers in the U.S. and China who plan to upgrade to new iPhones over the next 12 months reached a record high.
This interest in upgrades isn’t an industrywide phenomenon. Woodring expects Apple to be the only major global smartphone vendor that will gain market share this year. He thinks rivals using Alphabet‘s (GOOG 0.23%) (GOOGL 0.31%) Android operating system could see significantly lower smartphone demand due to higher prices resulting from a severe imbalance between supply and demand for memory chips.
Apple faces the same memory shortage. However, Woodring believes that the company’s impressive brand loyalty should allow it to weather the storm better than its top competitors.
Morgan Stanley’s survey reinforced this optimism. It found that Apple’s net switching rate rose to 11% — a five-year high. The recent survey revealed that Apple was the only major smartphone brand with a positive net switching rate and the only brand with an improving rate.
Today’s Change
(-0.87%) $-2.17
Current Price
$246.63
Key Data Points
Market Cap
$3.7T
Day’s Range
$245.51 – $250.87
52wk Range
$169.21 – $288.62
Volume
57K
Avg Vol
48M
Gross Margin
47.33%
Dividend Yield
0.42%
Know when to fold ’em
Why are customers eager to upgrade to new iPhones? Many of them are motivated by “new and advanced features,” according to the AlphaWise Global Smartphone Survey. Other driving factors include better device quality for newer iPhones and a broad base of customers eligible for upgrades.
Interestingly, though, the Apple Intelligence capabilities aren’t the main attraction for customers intending to upgrade. The survey found that consumer willingness to pay for these generative AI features sank 11% year over year.
What are iPhone owners especially hankering for? Foldable iPhones. Morgan Stanley’s survey revealed that 27% of current iPhone customers are “extremely interested” in buying a foldable iPhone. The number jumps to nearly 40% for customers in China.
To be sure, Morgan Stanley doesn’t predict that 27% of Apple’s iPhone users will scramble to buy a foldable iPhone when the new device launches (expected in fall 2026). However, demand for the upcoming version appears robust. Apple could expand the global foldable smartphone market by more than 2x within 18 months of the launch of its foldable iPhone, according to Morgan Stanley’s projections. This could put the new product’s potential annual revenue at up to $60 billion.
Quality deserves a premium
Apple isn’t a value stock, by any stretch of the imagination. Its forward price-to-earnings ratio stands at 28.8. That makes Apple the second-most-expensive member of the so-called “Magnificent Seven” stocks, ahead of only Tesla (TSLA 1.82%).
However, the iPhone ecosystem remains exceptionally sticky. Apple has greater pricing power than most companies. With significant pent-up demand for new iPhones and a major new form factor on the way, the stock doesn’t look overly expensive right now. Quality deserves a premium.
