Apple, Inc.'s (NASDAQ:AAPL) newest iPhone iteration that is armed with Apple Intelligence hasn't caught on in a big way ever since its launch on Sept. 9, and Morgan Stanley's analysis of the latest lead times data suggest that demand hasn't been anemic either.

The Analyst: Erik Woodring has an Overweight rating and a $273 price target for Apple's stock.

The Thesis: The iPhone 16 lead times were lower year-over-year but stable week-over-week, said Woodring in a note published on Tuesday. As of Oct. 11 (28 days after preorders started), iPhone lead times were three to 10 days lower year-over-year but Pro/Pro Max lead times have extended by two days week-over-week, showing stabilization, he said.

This is more encouraging than the contraction in lead times seen from the iPhone 15 at this point last cycle, the analyst said. He noted that the iPhone 16 Pro/Pro Max lead times have extended internationally, by 1.5 days on average from the previous week in all regions except China.

Also, supply-chain checks showed that Apple had asked suppliers to prepare component inventories earlier than typical patterns to avoid supply constraints, Woodring said. He noted that in the past cycles, supply shortages kept new model iPhone Pro/Pro Max supply/demand imbalanced for months.

"We believe that better supply conditions are one of the contributing factors to why iPhone lead times are shorter this cycle than in recent cycles," he added.

The smartphone supply chain suggests no change in iPhone builds, the analyst said.

Apple's China rival Huawei's high-end smartphone shipment will be constrained by limited chip supply and iPhone's market share will remain stable in China, he said.

Morgan Stanley predicts 225 million units of iPhone shipments for 2024, slightly above the 224 million-unit consensus forecast, and 234.5 million units for 2025.

IDC estimates iPhone sales of 56 million units in the September quarter, due to early iPhone 16 sell-in, persistent late-cycle iPhone 15 strength, and elevated promotional activity, the analyst said, adding this is 3.5 million units above Morgan Stanley's estimate and 6 million units above the consensus.

The 56 million iPhone shipments would equate to $3 billion or 3% revenue upside but lower-than-expected Mac shipments in the September quarter could be a partial negative offset, Woodring said.

Apple Stock: In premarket trading, Apple climbed 1.10% to $233.85, according to Benzinga Pro data.

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