TLDR
- Bernstein kept its Outperform rating and $370 price target but flagged downside risk to Apple’s December quarter margins.
- Rising memory chip costs, mainly DRAM and NAND, are pushing up the bill of materials for the iPhone 18 Pro Max.
- Bernstein cut its fiscal Q1 EPS estimate to $2.87 from $3.00, below the Street’s $2.92 consensus.
- Apple stock opened at $335.92 Friday and traded up 0.49% to $337.56.
- Portland Investment Counsel opened a new $2.18 million stake in Apple during the second quarter.
Apple stock traded at $337.56 on Friday, up 0.49% on the day. The move came as Bernstein warned that the company’s December quarter could face margin pressure from rising memory costs.
Bernstein analyst Mark Newman kept his Outperform rating and $370 price target on the stock. But his note pointed to trouble ahead for the holiday quarter.
Newman’s team ran a detailed bill of materials analysis. They found that memory chip costs are set to eat into Apple’s gross margin more than the market expects.
Why Memory Costs Are the Problem
DRAM and NAND memory make up about 90% of an estimated $168 year-over-year cost increase for the 256GB iPhone 18 Pro Max. That is a steep jump for a single component category.
Bernstein now forecasts iPhone gross margin of 40.4%. That is 390 basis points below what the Street is expecting.
Total company gross margin is projected at 46.2%, which sits 50 basis points under consensus. Stronger pricing overseas is helping to soften the blow.
Bernstein estimates the average international iPhone price increase is running about 1.3 percentage points above U.S. pricing. Without that cushion, the margin picture would look worse.
Using U.S. prices alone, Bernstein’s model points to an iPhone margin of just 39.6%. The firmwide figure would drop to 45.8% under that scenario.
Bernstein also cut its fiscal first-quarter EPS estimate to $2.87. That is down from $3.00 and sits 2% below the consensus figure of $2.92.
Higher-end iPhone models are expected to make up 70% of unit sales this cycle. That mix should help, but Bernstein says it won’t fully offset the cost pressure since demand remains concentrated in the lower-margin 256GB storage tier.
Institutional Buying and Analyst Views Stay Mixed
Portland Investment Counsel disclosed a new position in Apple during the second quarter. The firm bought 7,535 units of stock worth about $2.18 million, making it the firm’s 22nd-largest holding.
Other funds made moves too. Ascentis Wealth Management grew its position by 822.7%, while several smaller firms opened new stakes ranging from $30,000 to $109,000.
Institutional investors now hold 67.73% of Apple’s outstanding stock. That level of ownership reflects continued interest from professional money managers despite the margin warning.
Analyst opinion on Apple remains split. Robert W. Baird raised its price target to $330 and kept an outperform rating in July, while Barclays maintained an underweight rating with a $245 target.
MarketBeat data shows Apple carries a Moderate Buy consensus with an average price target of $340.14. That includes one Strong Buy, twenty-six Buy, thirteen Hold and two Sell ratings.
Apple’s most recent earnings report, posted July 30th, showed EPS of $2.02 against estimates of $1.89. Revenue came in at $109.42 billion, up 16.4% from the year-ago quarter.
The company also renewed its global patent licensing agreement with Qualcomm, effective April 1, 2027. Apple’s 52-week range currently sits between $243.42 and $345.34.
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