Abstract:
Apple grandly released new products on Wednesday local time, including the iPhone 18 Pro series and the iPhone Duo, a folding screen phone that has attracted much market attention. Analysts are generally optimistic about the new product launch, but Apple's stock price may still be slightly overvalued.
Morningstar pointed out that iPhone Duo is expected to be a high-end product produced in small batches. The starting price of US$1,999 also means that Apple will achieve double-digit growth in iPhone revenue by leveraging its price advantage in fiscal year 2027. However, market demand for Apple products is inelastic, and iPhone sales are expected to be flat in fiscal 2027.
The agency's analysts also said that Apple's stock price was flat during the US stock market on Wednesday, indicating that the conference was in line with expectations. However, the starting price of Duo is US$1,999, which is not more than US$2,000 as rumored. This may also be related to Apple's desire to increase prices moderately to maintain sales.
Currently, Apple’s gross profit margin is mainly affected by rising memory costs and other hardware prices, and its gross profit margin is expected to drop by more than 1 percentage point in fiscal 2027. But Apple may recover its gross profit margin in fiscal 2028, because the memory shortage dilemma will be resolved by then.
Morningstar raised its price target on Apple to $290 from $285, slightly below Apple's current level of $315. Analysts from the agency pointed out that Apple's stock price is still slightly overvalued, and the main reason for the increase in target price is the inclusion of Duo's pricing factors.
Profit margins are analysts' biggest concern about Apple. Investment bank Jefferies also pointed out that it believes that Apple is increasing product sales at the expense of profit margins. The price increase of 18 Pro and 18 Pro Max is relatively moderate. It was previously expected to be US$100 to US$200, and the actual price increase was US$100, which may cause some profit margin concerns.
However, the agency said that Apple may want to push the overall product portfolio to further tilt towards high-end models. Duo is a very trendy model and its pricing is also competitive, but the question is whether its output can meet demand.
KeyBanc pointed out in the research report that this new product will be slightly negative for Apple’s performance. The high selling price will most likely not be able to fully offset the pressure on gross profit margin, and shipments may decline, ultimately dragging down user scale and service business growth.
Jefferies reiterated its "underperform" rating on Apple stock, citing problems with its pricing strategy for new products. Lynx Equity also downgraded Apple, citing concerns about the stability of its supply chain, especially in terms of memory and flash memory supply.
HSBC, Bank of America and Evercore ISI are relatively optimistic. HSBC believes that Apple’s target price is US$366 and Evercore ISI’s target price is US$365. This target price has about 16% upside potential from the current stock price of US$315.
Evercore ISI said that the iPhone 18 Pro series will help the iPhone continue to maintain its growth momentum and promote the upgrade of users who have used devices for three or more years.
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