Apple’s iPhone 15 September quarter builds to see record high: Morgan Stanley

Morgan Stanley noted that Apple’s (NASDAQ:AAPL) iPhone 15 builds were stronger than expected in July, and that momentum seems to be building into the iPhone 16 launch.

Analysts led by Erik Woodring said that based on the latest checks from their Greater China Tech Hardware team, iPhone builds in July were stronger than originally expected, leading to an upward revision to September quarter iPhone builds to 54M units (+8% year-over-year), 2M units higher than prior forecast.

They noted that while early October iPhone sell-through is still most critical for next cycle growth, momentum seems to be building into the iPhone 16 launch.

The analysts said that the upward revision for the September quarter reflects a continued late-cycle iPhone 15 strength, as builds for all other iPhone models are unchanged, though it was not clear if this trend reflects upgrades due to the anticipation of Apple Intelligence or other factors.

The 54M iPhone builds represents an all-time September quarter build record (4M units higher than the previous record) and would imply September quarter iPhone shipments of 55M units (+10%year-over-year), 5% above Morgan Stanley’s current Sept quarter shipment forecast (of 52.5M units) and 10% above Consensus of 50M units, the analysts added.

Woodring and his team said that they have not heard of any increase to iPhone 16 builds, as of now. They said that the upward revision to the Sept quarter iPhone builds is only for the iPhone 15 (+1M units) and iPhone 15 Pro/Pro Max models (+1M units), and that estimates for the second half of calendar year 2024 for iPhone 16 builds remain unchanged at 85M to 90M units, and likely closer to around 87M units at the moment.

The analysts do not expect to see any potential adjustment to the fourth quarter of calendar year 2024 and/or iPhone 16 builds until early-to-mid-October, once early iPhone pre-order and sell-through data is more readily available.

Woodring and his team said that Apple guided to the September quarter in late July, which meant they likely knew of the better-than-expected iPhone 15 performance in July when providing the outlook. However, given Apple has not missed September quarter consensus expectations since 2016, it is likely the company gave itself some upside revenue buffer when guiding. Thus, the analysts believe that the July iPhone build upside increases the odds of a September quarter beat.

The analysts noted that they have left all their other September quarter revenue forecasts unchanged.

Apple has an Overweight rating and a $273 price target at Morgan Stanley.

Apple (AAPL) has a Hold rating at Seeking Alpha’s Quant Rating system, which consistently beats the market. Meanwhile, the Seeking Alpha authors’ average rating is also Hold, but the average Wall Street analysts’ rating is more positive with a Buy.