With memory prices skyrocketing, the global smartphone market is bracing for a tough year. But Apple is better positioned than its peers to weather the storm, according to Citi.
The firm slightly trimmed its fiscal 2026 and 2027 estimates for the iPhone maker, but reiterated a Buy rating and a $315 price target for the stock in research note Sunday night. While Apple isn't immune from rising component costs, it can take advantage of the pressure on its competitors to gain market share.
Apple stock was down 0.1% in Monday trading.
The soaring cost of memory components like dynamic random-access memory chips, or DRAM, is a real concern. Citi is baking a 50% DRAM price hike into Apple's estimates in the second quarter of calendar 2026 and a 100% spike in the second half of the year. Memory accounts for around 9% of iPhone costs and 15% of iPad and computer costs, Citi said.
But Apple has learned its lesson from previous memory demand cycles.
"We believe Apple's procurement team and purchasing strategies have improved over the years," wrote Citi analyst Atif Malik. "And Apple likely has the best negotiation power among all smartphone vendors."
Citi estimated a 1.4 percentage-point hit to Apple's gross margins from rising memory prices in 2026 and a less than 0.5-point impact in 2027. The company's smaller and lower-cost rivals may be more susceptible to rising component prices.
One sign Apple is managing the pressure better than its competitors: The company last week unexpectedly launched multiple products at more affordable prices. The new iPhone 17e starts at $599, below the starting price of $799 for the standard iPhone 17. The MacBook Neo also starts at $599, a 40% discount from the last-generation MacBook Air at $999.
The new products were a sign of Apple's resilience to supply pressures, said Evercore ISI analyst Amit Daryanani.
"We think investors are underappreciating how well AAPL is perhaps managing through the memory inflation issue and, critically, how recent product launches demonstrate its ability to offset these pressures," Daryanani wrote. Evercore rates Apple as Outperform with a $330 price target.
Comments