Apple’s 2027 iPhone Growth To Come Almost Entirely From Higher Prices, Morningstar Says — Sees Flat Unit Sales

• Morningstar cut its fiscal 2027 EPS estimate to $9.32 from $10.47 but maintained its $290 fair value estimate.
• Apple's margins are estimated to compress by about two percentage points in fiscal 2027 as rising memory costs pressure profitability.
• The firm forecasts Apple services revenue growth of more than 10% over the next five years.

Apple’s (AAPL) iPhone revenue is expected to grow at a high-single-digit rate in fiscal 2027, driven almost entirely by higher prices, with unit sales flat and the iPhone 18 lineup offering largely incremental upgrades, according to Morningstar.

The firm’s senior equity analyst William Kerwin expects the premium iPhone Duo, which starts at $1,999, to contribute to higher average selling prices.

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At the time of this writing, AAPL stock traded nearly 4% down in Tuesday’s premarket session.

What Apple's Latest Earnings Showed

Apple on Monday reported fiscal fourth-quarter revenue of $114.5 billion, up 12% year over year, beating estimates of $113.37 billion. The company’s earnings per share (EPS) rose to $2.10, beating estimates, according to FiscalAI data.

iPhone revenue rose 17% to $57.6 billion despite supply constraints, according to management's remarks on the earnings call. Gross margin reached 47.9%, including a favorable impact of approximately one percentage point from tariff refunds.

Morningstar Sees Margin Pressure Through 2027

Morningstar expects Apple's margins to compress by about two percentage points in fiscal 2027 as rising memory costs pressure profitability, partially offset by higher device prices. It expects memory prices to ease beginning in 2028, supporting a recovery in margins.

The firm’s financial model now forecasts fiscal 2027 diluted EPS of $9.32, down from $10.47 in its previous October 13 model. Its revenue estimate for the year also declined to $520.5 billion from approximately $550 billion.

Morningstar maintained its $290 fair value estimate for AAPL stock, viewing the shares as moderately overvalued.

Apple's AI Push Unlikely To Accelerate Upgrade Cycles

Morningstar analyst supports Apple's strategy of integrating artificial intelligence (AI) into consumer features rather than competing to develop frontier AI models. 

However, the firm doubts AI capabilities will materially increase iPhone unit sales or accelerate replacement cycles, although it expects AI features to help retain customers within Apple's ecosystem.

Morningstar forecasts a stronger iPhone growth cycle in fiscal 2028, driven by an expected 20th-anniversary iPhone. It also projects services revenue growth of more than 10% over the next five years, driven largely by Google search payments and Apple's share of App Store revenue. 

Regulatory pressure is expected to reduce Apple's cut of App Store revenue later in the decade.

Barclays Flags Slowing Services Growth

For the December quarter, Apple projected revenue growth of 7% to 10% and a gross margin of 45% to 46%, reflecting higher memory costs and expenses related to the ramp-up of Siri AI.

Barclays analyst Tim Long raised his Apple price target to $261 from $245 but maintained an ‘Underweight’ rating, according to TheFly. Long said Apple's Q4 results and first-quarter outlook were not far from consensus expectations. 

While Macs continue to outperform, they account for only a high-single-digit share of Apple's revenue, the analyst noted. The firm also flagged Services revenue growth slipping below 10% and further deceleration in Apple's outlook. Apple expects Services revenue to grow 8% to 9% in the December quarter.

What Retail Thinks About AAPL Stock

Retail Investors’ sentiment around AAPL stock on Stocktwits flipped to ‘extremely bearish’ territory from bearish a day ago, amid high user message volume.
 

So far this year, AAPL stock has risen nearly 25%. By comparison, the Roundhill Magnificent Seven ETF (MAGS) and the Vanguard Morningstar Growth ETF (VUG), which hold the stock, have risen about 4% over the same period.

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