Apple (AAPL) shares dropped 2.5% on April 21 after it revealed its biggest news for many years. Its current CEO, Tim Cook, will step down from the position and be replaced by John Ternus, the firm’s senior vice president of hardware engineering.
Next week, the iPhone maker will report its fiscal second-quarter earnings on April 30. This is one of the few earnings left with Cook under the CEO position before he leaves on September 1.
Leadership change is usually handled carefully because it can worry investors. The timing of this announcement hints that Apple may have positive news to offer.
“My gut tells me this was announced before earnings so we can focus on a great quarter with strong fundamentals next week when Apple reports,” Melius’s head of technology research Ben Reitzes wrote in a research note, CNBC reported. “Cook was CEO a long time and likely wants to leave on a high note.”
In the upcoming earnings, Investors are weighing steady demand across iPhone and other devices against rising cost pressures, especially in memory components, which could squeeze margins in the near term.
In January, Apple reported excessively strong sales of the iPhone, particularly in China. Revenue from iPhone surged 23% year over year to $85.27 billion, driven by strong sales of the iPhone 17 models. iPhone sales account for nearly 60% of Apple’s total revenue.
In the January earnings call, CEO Cook acknowledged that the rising chip prices will have a “bit more of an impact” on the company’s Q2 gross margin. Still, Apple forecast a gross margin of 48% to 49%.
Morgan Stanley is revisiting Apple stock ahead of earnings. Here’s what the firm sees.
Apple’s margin pressure is largely priced in
Morgan Stanley reiterated its $315 price target with an overweight rating on Apple, arguing that the iPhone maker is “a tactical long into earnings” and the near-term margin pressure is already well understood by investors.
“Memory inflation will pressure margins, but this is well known,” the analysts wrote in an April 20 research report sent to TheStreet. “We expect gross margin downside to be more than offset by revenue upside in the June quarter guide, making for better-than-feared earnings.”
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Still, Morgan Stanley expects Apple’s June quarter (fiscal Q3) gross margin to come in below consensus, “given concerns about memory price inflation.”
Beyond that, the firm also sees risks from weaker demand if higher iPhone prices or macro conditions weigh on consumers, as well as potential volatility tied to the staggered iPhone launch schedule, which could affect revenue and margin timing.
On the revenue side, Morgan Stanley sees continued strength in Apple’s core business, the iPhone.
“We continue to see strong iPhone sell through in March, above-seasonal builds in June, and a significantly above-Consensus CY26 iPhone build forecast from the supply chain,” the analysts said.
Morgan Stanley said strong iPhone sales, along with upside in Mac and services, are driving the firm to modestly raise its March and June quarter revenue forecasts to about 1% to 5% above consensus estimates.
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Why Apple is “an increasingly attractive” buy before September
Beyond the quarter, attention turns to catalysts.
Morgan Stanley said two catalysts could make the upcoming earnings a “clearing event” and drive stronger performance for Apple.
The first is Apple’s June Worldwide Developers Conference, where expectations are low, but that could work in Apple’s favor. The firm highlighted that “a meaningful Siri redesign could be a meaningful sentiment tailwind.”
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The second is the September iPhone launch. Morgan Stanley expects “a new iPhone launch this fall that brings genuine new product excitement,” which could help drive renewed investor interest.
The bank also pointed to Apple’s cash level as a support factor, noting its “robust FCF generation stands out positively,” while other mega-cap tech companies are ramping up spending on AI infrastructure.
Regarding Apple’s CEO change, Morgan Stanley said it is “unlikely to alter Apple’s core strategy/vision across hardware, services, software, capital returns, or vertical integration.
“With a CEO transition, we can envision some renewed investor optimism,” the analysts wrote in another research note where they did not change their $315 price target for Apple. “Fundamentals are solid.”
Apple stock closed at $266.17 on April 21 and is down 2.1% year to date.
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