Apple Inc. (NASDAQ:AAPL)’s iPhone 5C was on the receiving end of plenty of derision from analysts, mainly because of how expensive it is. But a few are looking on the bright side. Morgan Stanley analysts Katy L. Huberty, Jerry Liu and Scott Schmitz report that they have raised their 2014 fiscal year earnings per share estimate because of better pricing and margins for the iPhone 5C.

Apple Inc. AAPL

Apple estimates raised, new iPhones off to a good start

The analysts said their raised their fiscal 2014 year earnings per share estimate by $2.47 to $44 per share. On a net basis, they raised their fourth fiscal quarter of 2013 estimate to $8 per share, compared to $7.51 per share previously.

They note that Apple Inc. (NASDAQ:AAPL)’s iPhone launch weekend resulted in strong sales which reflect strong demand. The company set a new record for iPhone launches, selling 9 million handsets in three days. Huberty and her team estimate that of those 9 million iPhones, about 3 million of them were iPhone 5S sell-through with real demand closer to 6 million. They believe about 2 million of them were iPHone 5C non-Apple inventory build, which would represent about one to two weeks of inventory.

The analysts also note that iOS 7 is off to a great start as well, with two-thirds of all iPhones running on the new operating system within five days of its introduction. That’s compared to 45 percent last year and 20 percent in the previous year.

Still banking on China

According to the research note, their base iPhone model assumes that buyers in China and Japan drive about half of Apple Inc. (NASDAQ:AAPL)’s new users. They believe new users in other regions will drop 24 percent as the smartphone market matures. Huberty and her team is forecasting a “consistent” two and a half year upgrade cycle, although they said trade-in programs could speed up the upgrade cycle, bringing upside in their bull case.

They note that the iPhone 5C gets the highest mix at 47 percent, while iPhone 5S models make up 38 percent of shipments in the base case. The analysts said given the strong sales of the iPhone 5S in the first weekend though, their bull case “assumes mix reverses.”

Morgan Stanley kept the Overweight rating and $540 per share price target on shares of Apple Inc. (NASDAQ:AAPL).