Morgan Stanley analyst: Apple brakes the laws of economics

- Adrian Ungureanu

iPhone X prices are debated by everybody and analysts are trying to figure out how Apple manages to find so many buyers despite its premium prices.

Normally, the higher the prices the lower the demand should be, but that’s not the case with Apple products, says Katy Huberty, a Morgan Stanley analyst.

“Innovation-led price increases historically boost, rather than hinder, Apple demand,” wrote Morgan Stanley analyst Katy Huberty in Tuesday’s note to clients.

She explains further: “Apple is an aspirational brand offering high quality, innovative products at a premium price. As a result, the company escapes the typical trend of declining prices that drive demand for other devices. In fact, demand for iPhone is directly correlated to the direction of ASPs – higher prices, higher demand and vice versa.”

Huberty’s raised her 2018 revenue forecast to $301 billion, 14 percent higher than the Wall Street consensus.

Also, Morgan Stanley on Tuesday raised its 12 to 18-month price target for Apple shares to $194 from $182, as the firm sees the higher prices as positive, not a negative like some other research firms on Wall Street. Currently Apple shares hover around 158 dollars per share.

Morgan Stanley also noted the extreme loyalty of Apple customers, which is showing signs of increasing from already high levels.

“According to our April 2017 AlphaWise US Smartphone survey, Ninety-two percent of US iPhone users who plan to upgrade their phone in the next year plan to repurchase an iPhone, up from 86% the year before.”