(This story is for CNBC Pro subscribers only.) An increase in air pollution in China leads Morgan Stanley to believe that Apple's industrial production is back to normal following the coronavirus crisis. The Wall Street firm, which recommends buying Apple's stock, tracks for nitrogen dioxide levels in China's air quality, a first-level indicator of industrial activity. Based on the data, Apple's factories are working at a high-than-normal rate, the firm said. "Air quality data from 4 major Chinese manufacturing locations suggests that device production remains above seasonal levels which combined with build forecasts that are above our forecast point to potential for better than expected F3Q guidance," Morgan Stanley equity analyst Katy Huberty said in a note to clients. Apple's stock has tumbled alongside the broader market during the coronavirus shutdown, more than 16% off its most recent high in February. Apple was one of the first companies effected by COVID-19 because of its large presence in China, the virus's original epicenter. IPhone factories shut down as Asia dealt with the virus threatening Apple's supply chain. Now, the company is being hit on the demand side with store closures in America due to the "stay-at-home" orders. Using the unique air quality metric, Morgan Stanley said production is above average in China, which could lead to Apple beating the firm's June quarter iPhone and iPad estimates. The firm forecasts 32.9 million iPhone shipments and 9 million iPad shipments in the second quarter of 2020. Morgan Stanley said China's increased production could also cause Apple to deliver better-than-forecast third quarter guidance. Morgan Stanley has an overweight rating on Apple and a $298 per share price target. Shares of Apple rose 2.75% to $275.76 on Wednesday. — with reporting from CNBC's Michael Bloom.
