Morgan Stanley said Thursday that its smartphone tracker is indicating stronger-than-expected demand for Apple Inc.'s iPhone in the current quarter, driven by emerging markets and especially China. The tracker, which compiles sell-through data using web search analysis, is indicating demand of 53 million units, above Morgan Stanley's revised estimate of 50 million. "Importantly, demand continues to top expectations despite Apple approaching the end of the current product cycle," analysts wrote in a note. Morgan Stanley is raising its fiscal 2015 estimate for the iPhone by 5% to 240 million units, and its fiscal 2016 estimate by 7% to 290 million. The broker also raised its estimate for the Apple Watch by 20% to 36 million units in the first 12 months from a prior 30 million. It raised its fiscal 2015 revenue estimate by 3% and EPS estimate by 4% as "iPhone carries above-average gross margins and Watch margins improve over time." Shares were slightly lower in premarket trade, but are up 18% in the year so far, while the Dow Jones Industrial Average has gained 2.6%.
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