First time in ten years! Apple discusses "price increase," iPhone 18 may get more expensive

```

For the first time in a decade, Apple has listed "price increases" as an option to address cost pressures in its quarterly report documents. Based on this, Morgan Stanley assesses that the entire iPhone 18 lineup, to be released this September, may see a price hike of over $100 for the same configuration, as a way to offset soaring NAND flash and DRAM memory costs.

This is the first time in ten years that Apple has proactively included product pricing as a tool for profit management in public disclosures—a highly significant signal.

The 10-Q Wording Has Changed

In its latest filed 10-Q quarterly report, Apple mentions that "industry-wide supply constraints, as well as rising costs for advanced semiconductors, storage (NAND), and memory (DRAM) and other components" are causing fluctuations in net sales and gross margin.

While this statement itself is not surprising, it is noteworthy that Apple specifically lists "product pricing and product pricing actions the company may take" as one of the means to address these pressures in the same document.

Morgan Stanley analyst Erik Woodring points out that historically, Apple's comments on pricing have been limited to competitive dynamics, and price increases have always been a last resort in inflationary environments. Morgan Stanley believes this change in wording reinforces the likelihood that Apple may actually raise prices.

Of course, this does not mean a price hike is set in stone—the 10-Q document also does not specify whether "product" refers only to hardware or also includes services such as iCloud. Morgan Stanley also notes that this language should not be taken as a guarantee that prices will rise when the new iPhones are released in September.

The Cost of Not Raising Prices

Morgan Stanley’s cost calculations point to a real issue: If Apple chooses not to raise prices, once it runs out of lower-cost inventory previously purchased, higher storage costs will be fully reflected in the FY27 income statement, putting the company's profitability at substantial risk.

Meanwhile, Apple’s new CEO John Ternus is in his first year in charge. Morgan Stanley believes the likelihood of him proactively accepting profit declines at this point is extremely low. In Morgan Stanley’s view, the core goal of a price increase is not to stubbornly defend margin percentages, but to preserve the absolute gross profit across product lines.

Based on the assumption of a price increase of more than $100 across the whole iPhone 18 lineup—which is already included in their model—Morgan Stanley projects that FY27 iPhone shipments will remain roughly flat (year-over-year +1%), but the price hike for same configurations combined with the portfolio shift brought by the foldable iPhone will push the average selling price (ASP) of iPhones up over 10% year-over-year, driving iPhone revenue growth of 14%, and supporting full-year earnings per share of $10.23.

Morgan Stanley maintains an "Overweight" rating on Apple, with a price target of $330, based on 8.3x EV/Sales for FY27, implying a roughly 32x price-to-earnings ratio.

As of the close on April 30, Apple was trading at $271.35, with a market capitalization of about $4 trillion.

~~~~~~~~~~~~~~~~~~~~~~~~

The above is from Zhuifeng Trading Desk.

For more in-depth interpretation, including real-time analysis and frontline research, please join [Zhuifeng Trading Desk · Annual Membership]

Risk Disclosure and DisclaimerThe market is risky; investments should be made with caution. This article does not constitute personalized investment advice and does not take into account the specific investment objectives, financial conditions, or needs of individual users. Users should consider whether any opinions, viewpoints, or conclusions in this article are suitable for their individual circumstances. You bear all responsibility for your investment decisions. ```