Bank of America analyst Wamsi Mohan reiterated his buy rating on Apple but cut his price target to $370, down from $380, after the iPhone 18 Pro and Pro Max launched at prices lower than he expected. The move came at John Ternus's first iPhone event as Apple's chief executive, which also introduced the company's first foldable iPhone, the Duo.
Lower-than-expected prices squeeze margins
Mohan's price target cut followed the reveal of the new iPhone lineup. The iPhone 18 Pro starts at $1,199 and the Pro Max at $1,299, $100 higher than the prior generation but still below the increase Mohan had estimated.
That gap could help Apple sell more phones, but at lower margins. Apple is dealing with a surge in memory prices that has already pushed the company to raise Mac prices earlier this year, and management has said gross margins for the fourth quarter will run between 47% and 48%, down from 50% in the third quarter. Apple is trying to balance higher device prices against absorbing some of the rising memory costs itself.
The Duo could help margins recover later
There's a potential offset. Gene Munster, founder of Deepwater Asset Management, thinks up to a third of Pro Max owners will switch to the new iPhone Duo, which starts at $1,999. If that happens, Munster believes the Duo could account for 10% of total iPhone revenue in 2027, and its higher price point could eventually lift Apple's iPhone margins.
Apple keeps its AI spending light
Unlike many of its peers, Apple isn't ramping up spending on artificial intelligence infrastructure, even as those costs are expected to collectively reach $1.3 trillion next year across the industry. Instead, Apple continues building on its existing lineup of high-end products, and its scale remains a strength: there are 2.5 billion active Apple devices worldwide, giving its newest hardware a large base for future upgrades.
Ternus also has more than $39 billion in cash at his disposal for new product and services development and acquisitions, giving him room to invest through the current memory-cost pressure. Apple shares trade at $336.13, down 0.26% on the day, against a market cap of $4.9 trillion.
Source: The Motley Fool
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