Apple's services deceleration poses valuation risk, warns Morgan Stanley

Apple's valuation faces pressure from a projected slowdown in its Services business, according to Morgan Stanley analyst Erik Woodring. The recurring revenue division is tracking toward its first sub-10% expansion in the September quarter since at least several years prior. With the stock commanding roughly 33 times fiscal 2027 earnings—matching historical highs of 34-35 times—limited room exists for investor disappointment in either near-term iPhone adoption or longer-term subscription revenues. Woodring remains constructive on iPhone 18 Pro demand and the upcoming foldable Duo device, but emphasized that meaningful acceleration would require fresh earnings upgrades to sustain momentum in the share price. Current supply indicators suggest healthy iPhone 18 Pro and Pro Max interest, reflected in lead times of 2-4 weeks.

1. Apple's Services growth is projected to slip below 10% for the September quarter, marking the first such slowdown in several years
2. Erik Woodring, Morgan Stanley's analyst, cautioned that a more pronounced deceleration in Services could dampen Apple's valuation multiples
3. Apple trades at roughly 33 times fiscal 2027 earnings, approaching the historical peak multiple of 34-35 times
4. For the stock to advance further, Morgan Stanley suggests that Wall Street will need to lift its earnings forecasts
5. Woodring sees healthy demand for iPhone 18 Pro and Pro Max models, with lead times ranging from 2-4 weeks