Apple upgraded by Morgan Stanley

Morgan Stanley believes that the iPhone will be the source of 50% of the company's earnings in 2010, up from 30% in 2008. The firm's analyst said, "We expect a price cut to the current generation iPhone to drive 50 percent to 100 percent (2 million to 4 million units) incremental unit demand. [...] Our survey data suggests 15 percent plus of the iPhone installed base typically upgrade to a new phone." With the iPhone leading the pack as far as new smartphones go (holding 38% of the market share), is this a safe bet?

Apple was once seen as a recession-proof stock, but that thinking was proved wrong when the stock dropped to the $86 region. Now that many believe a recovery is at hand, Apple is rallying, pushing up to resistance at the $126 level. There is little to no overhead resistance in the form of moving averages, so it may seem that Apple is in the clear.

I once believed that a major problem with Apple was the fact that analyst coverage was overwhelmingly bullish, which could lead to downgrades. I'm betting that downgrades won't be rolling in any time soon, just because of the intense love analysts hold for Apple. If the computer king has to withstand a downgrade or two we could see the company's performance impacted.

With so many people wanting to own the latest in technology, Morgan Stanley's assertion is safe -- people will continue to buy iPhones if they can afford them or not. Knowing human nature, iPhone sales will continue to rise and this analyst's prediction may come true.