After having upgraded Apple Inc's rating to "overweight," Morgan Stanley said that the iPhone maker is turning out to be the obvious leader in the battle over mobile Internet. It also added that in the next two-year period, iPhone-driven earnings will record profit growth.

In a note to clients, analyst Kathryn Huberty said that the price target on the iPhone stock can well be raised to $180 from $105. Adding that the market is underrating iPhone unit demand in 2009 second half and 2010, Huberty said that the device's demand will likely lead to a speeding up of earnings growth, upward revisions in estimates and manifold expansion.

Huberty's note said: "The core of our stock call is that the iPhone's success and higher margins will begin to mute the fundamental margin and growth risks in Apple's core Mac/iPod businesses."

The Cupertino, California-based Apple has sold over 21 million iPhones since their 2007 launch, with the sales numbers increasing two-fold in the last quarter, as against the year-before numbers. By making the smartphone available in more countries and introducing more applications and newer models, Apple has persisted in circumventing a slump in consumer spending.

At the June 8 Worldwide Developers Conference, Apple would likely highlight a new iPhone operating system in two versions - a higher-priced phone and a model with a more economical service plan.