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By Barbara Kollmeyer and Hannah Pedone The company raised prices on its phone but might still have to eat costs itself, analysts say. Apple announced its first foldable phone on Wednesday. Apple may be prepared to absorb some costs to drive smartphone sales as consumers are more strapped for cash. The company on Wednesday unveiled the new iPhone 18 Pro line, as well as its first foldable phone, dubbed the Duo. While the features of the phones were largely in line with expectations, pricing was a big unknown heading into Wednesday's event.
Apple (AAPL), like other consumer-electronics companies, must weigh its own increasing costs against inflation and other factors that are hitting customers. Jefferies analysts, led by Edison Lee, suggested Apple appears focused more on the number of devices it can sell than its margins—the measure of how much revenue the company retains after incurring the costs of making its products. He noted that the $100 price hikes on newer and earlier-generation phones came in below the $150 to $200 increases on iPad and MacBooks, instituted this summer.
Apple is walking a 'tightrope' on products to preserve volumes and margins, according to JPMorgan analysts led by Samik Chatterjee. They flagged that consumers will get flexibility through a new leasing program as well as various trade-in offers. The analysts believe that the combination of 'favorable' pricing moves and AI features will drive 'robust' iPhone revenue growth.
Brian White, analyst at Monness, Crespi, Hardt & Co., wrote in a Thursday note that this is Apple's priciest iPhone ever, referring to the iPhone Duo, which starts at $1,999. He noted that Apple had boosted prices for other products in June but 'spared the iPhone' until yesterday. White said that Apple is attempting to 'smooth out the seasonality of its iPhone revenue' by introducing a new cadence for its iPhone releases and updates. The company held off on updates to its base-level iPhone models during Wednesday's event, instead focusing on more premium smartphones. He expects the two standard iPhone models to be updated in early 2027, potentially alongside the company's budget-friendly iPhone 18e.
Mark Newman, Bernstein analyst, wrote Thursday that, in addition to instituting price increases on new models, the company has 'bucked its trend' of discounting older models by $100. Instead, Apple increased prices of those older models by $100. He said that this move, combined with the staggered launch of its iPhones, could offset the impact of rising memory costs on gross margins, a profit metric. He noted that while the new product releases are well-received, there remains uncertainty about the new level of gross margins with today's elevated memory prices.
Shares of Apple rose 3.6% on Thursday.
Source: Morningstar
