Apple stock has been on a nice tear of late as analysts have harped on Samsung’s trash (the exploding Note 7) as Apple’s treasure. The iPhone maker’s shares finally had a tough time on Thursday, but they bounced back quickly on Friday as the countdown to the next earnings report is on. iPhone 7 sales will be a key component of Apple stock over the next several months.

Apple Stock Rests On iPhone 7 Demand, Earnings Even More Nail-biting

Apple stock target upped for strong iPhone 7 sales

The September quarter has just a short time covering iPhone 7 sales. This is pretty typical of September quarters, although this year’s quarter has more sale days for the newest handsets compared to the year-ago quarter with the iPhone 6s. While there are always differences in iPhone unit estimates among analysts, this year there seems to be an exceptionally wide berth where headlines are concerned.

Morgan Stanley analyst Katy Huberty bumped up her price target for Apple stock by $1 to $124 per share based on better-than-expected iPhone 7 demand. While she said that their higher iPhone estimates in the near term are already mostly baked into Apple stock, she added that she’s getting more confident that the iPhone 7 cycle will drive “meaningful” revisions to estimates and push the shares toward her $162 bull case.

Indeed, the headlines here fall into one of two categories: “iPhone 7 sales are better than expected” or “iPhone 7 sales are weak.” Of course Huberty falls into the former category and has for a long time.

Apple estimates increased

The analyst increased her estimates for Apple’s fourth fiscal quarter, as she believes the features of this year’s new phones are “compelling enough” to result in a “record number of switchers and decent number of refreshers” off Apple’s current installed base of more than 600 million iPhones. She believes that the dual-lens camera on the iPhone 7 Plus and “to a lesser extent,” Samsung’s Note 7 recall are shifting the iPhone mix toward the larger of the two phones, thus boosting the average selling price and margins.

Huberty estimates that every 10-point increase in iPhone 7 Plus mix will add $20 to the average selling price, raise the gross margin 15 basis points and add 1 or 2 cents to Apple’s earnings per share. She believes the company will come in toward the high end of guidance because iPhone 7 demand appears strong but supply is limited. As a result, she bumped up her iPhone unit estimate from 43 million to 44 million and moved her average selling price estimate from a decline of 7% to a decline of 3% due to greater demand and better mix.

However, she cut her iPad unit estimates. She now pegs Apple’s September quarter at $47.2 billion in revenue, $1.65 per share in earnings, and a 38% gross margin, which are in line with consensus. They’re also close to the high end of management’s guide for $45.5 billion to $47.5 billion in revenue and 37.5% to 38% gross margin. While she sees this year as shaping up well already, she called fiscal 2018 the real supercycle.

Apple may not benefit from Samsung’s troubles

While Apple bears are relatively few compared to the general bullishness that has surrounded the company for some time, they do exist. One such example is Forbes contributor Bert Dohmen of Dohmen Capital, who said that iPhone 7 sales are so poor that Apple didn’t even release first week sales as it has in the past. However, the company has said that supply is the problem rather than demand, although this is something we won’t know until we see unit numbers for the September and December quarters (but mostly December).

Dohmen argues that Apple won’t end up being the main beneficiary of Samsung’s Note 7 debacle because he believes that consumers who have had a Galaxy phone won’t return to the “Apple ‘eco-jail.'” He also noted that a “relatively small number of people” use the Note, which is also a very large device. As a result, he suggests that Note 7 users may be more likely to turn to other Android devices such as Google’s new Pixel phones.

Apple stock edged upward by as much as 0.28% to $117.31 during regular trading hours on Friday.