Mild price increase for the first time in seven years? Morgan Stanley: All eyes on the iPhone 17 pricing at next week's Apple event
Morgan Stanley predicts that Apple may achieve its first "moderate price increase" in seven years by canceling the 128GB entry-level configuration of the Pro version and launching a higher-priced ultra-thin model, driving the average selling price of the iPhone up by 5%, far exceeding the market expectation of 1%. If this strategy comes to fruition, it is expected not only to offset cost pressures but also to break the "post-launch stock price decline" curse, becoming a positive catalyst for driving up Apple's stock price before the end of the year
As the Apple fall event approaches, investors are looking beyond the new products themselves and focusing on a more critical question: pricing.
According to news from the Wind Trading Desk, Morgan Stanley pointed out in a report released on September 4 that Apple may achieve its first "moderate price increase" for the iPhone in seven years through a series of subtle product line adjustments. This could become a catalyst for the company's stock price increase.
Analyst Erik W Woodring predicts that while the upcoming iPhone 17 series may not bring too many surprises in terms of product features, its pricing strategy could be the core highlight of the entire event. The firm expects that Apple will not directly raise the prices of existing models with the same configuration but will instead increase the overall price in a more clever way.
The key to this strategy lies in two points. First, the report predicts that Apple will eliminate the 128GB entry-level storage version of the iPhone 17 Pro, meaning that the starting storage capacity for the Pro series will become 256GB, and its starting price will rise to $1,099, an increase of $100 from the previous generation's starting price of $999 (128GB).
Second, the highly anticipated new ultra-thin model, the iPhone 17 Air, is expected to have a starting price of $999 (256GB), which is $100 higher than the iPhone 16 Plus model it replaces. At the same time, the iPhone 17 Air will introduce a 1TB version (priced at $1,399), while the prices of other models with the same capacity will remain unchanged.
Price Increase Logic: Offsetting Tariffs and Cost Pressures
The report analyzes that the price increase mainly stems from two factors: first, to offset the cost pressures brought by import tariffs and rising component prices, and second, to drive users to choose higher-priced models through storage configuration adjustments.
This potential pricing move is the core reason why Morgan Stanley is optimistic about Apple's performance outlook. The firm predicts that this will drive the average selling price (ASP) of iPhones in Apple's fiscal year 2026 to grow by 5% year-on-year to $939. In contrast, the market generally expects only a 1% increase to $910, implying that Apple's revenue and profit potential may be underestimated.
Due to the market consensus being relatively subdued regarding expectations for iPhone sales and price growth, this release event may defy the norm and reverse the "sell-off events" typically triggered by past release events, transforming into a positive catalyst that supports Apple's stock performance before the end of the year.
Despite the price increase, analysts believe its impact is manageable: "These increases are relatively moderate, and if spread over a 2-3 year replacement cycle, they are unlikely to pose a substantial barrier to (consumer purchasing) demand."
The Launch Event Itself Is Not Surprising
The report believes that this launch event is not expected to have any major surprises. The iPhone 17 series will include the regular iPhone 17, iPhone 17 Pro/Pro Max, and a brand new ultra-thin model, the iPhone 17 Air, which features a single rear camera and Apple's self-developed C1 modem.
In addition, Apple will also launch the Apple Watch Series 11, Ultra 3, SE 3, and AirPods Pro 3.
Conservative Sales Expectations, Potential Upside
Despite rising prices, Morgan Stanley and market consensus currently hold a conservative attitude towards the sales growth of the iPhone 17, expecting that the shipment volume for the fiscal year 2026 will be basically flat compared to the previous year, at about 236 million units. This forecast implies that the average upgrade cycle for users will further extend to nearly 5 years.
However, the report also points out that this conservative expectation may itself contain upside risks. Morgan Stanley cites its earlier survey data, stating that as of March 2025, 51% of U.S. iPhone users indicated that they are "very likely" to upgrade their devices in the next 12 months, setting a historical high. Additionally, 30% of U.S. iPhone users have shown "great interest" in the ultra-thin model.
Nevertheless, price sensitivity remains a risk that needs to be monitored. A survey conducted in China in July 2025 showed that if the price of the iPhone 17 increases by 5%, 25% of Chinese consumers indicated that their likelihood of upgrading would decrease. Overall, analysts believe that the current shipment volume expectations are reasonable, but future risks are more skewed towards the upside rather than the downside.
Breaking the "Sell the News" Curse?
Historically, Apple's iPhone launch events have often been typical "sell the news" events, where stock prices experience a pullback after the event materializes. This is usually because market expectations have been fully priced in before the launch event, or even overly optimistic.
However, Morgan Stanley believes that this year may be different. The report analyzes that the current market's general expectation for Apple's iPhone revenue growth in fiscal year 2026 is only 4%, far below the historical average of 9% over the past decade from 2011 to 2020.
Therefore, if Morgan Stanley's judgment on pricing strategy is correct, the outcome of the iPhone 17 launch event is likely to exceed the market's low expectations. At that time, this event may not only fail to become a negative catalyst but could also prompt analysts to raise their earnings forecasts, providing support for Apple's stock performance before the end of the year, thereby breaking the "launch event curse" of recent yearsThe report summary states: "If the pricing strategy exceeds expectations, the launch event may become a positive catalyst for the stock price, driving valuation recovery and performance upgrades." Morgan Stanley has rated Apple stock as "Overweight," with a target price of $240.
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