On Wednesday local time, Apple grandly unveiled new products, including the iPhone 18 Pro series and the highly anticipated foldable phone, the iPhone Duo.
Analysts are generally optimistic about this new product launch, but Apple's stock price may still be slightly overvalued.
Morningstar noted that the iPhone Duo is expected to be a high-end product produced in small batches. With a starting price of $1,999, this means Apple will achieve double-digit growth in iPhone revenue in fiscal year 2027 thanks to its pricing advantage. However, demand for Apple products lacks elasticity, and iPhone sales are expected to remain flat in fiscal year 2027.
The firm's analysts also stated that Apple's stock remained flat during Wednesday's U.S. trading session, indicating that the launch met expectations. However, the Duo's starting price of $1,999 is not as high as the rumored over $2,000, which may also be related to Apple's desire to keep price increases modest to maintain sales volume.
Currently, Apple's gross margin is mainly affected by rising memory costs and other hardware prices. Its gross margin in fiscal year 2027 is expected to drop by more than 1 percentage point. However, Apple may recover its gross margin in fiscal year 2028, as the memory shortage dilemma is expected to be resolved by then.
Morningstar raised Apple's target stock price from $285 to $290, slightly below Apple's current level of $315. The firm's analysts pointed out that Apple's stock remains slightly overvalued, and the main reason for the target price increase was the inclusion of the Duo's pricing factors.
Profit margins are analysts' biggest concern regarding Apple. Investment bank Jefferies also pointed out that it believes Apple is boosting product sales at the expense of profit margins. The price increases for the 18 Pro and 18 Pro Max were modest, at $100, compared to previous expectations of $100 to $200, which may raise some concerns about profit margins.
However, the firm stated that Apple may wish to push its overall product mix further toward high-end models. The Duo is a very trendy model with competitive pricing, but the question remains whether its production volume can meet demand.
KeyBanc pointed out in its research report that the new products have a slight negative impact on Apple's performance. High selling prices are unlikely to fully offset the pressure on gross margins, shipments may decline, and ultimately drag down user base growth and service business growth.
Jefferies reaffirmed its "Underperform" rating for Apple stock, citing issues with the pricing strategy of its new products. Lynx Equity also downgraded Apple, expressing concerns about its supply chain stability, particularly regarding memory and flash storage supplies.
HSBC, Bank of America, and Evercore ISI are relatively optimistic. HSBC sets Apple's target price at $366, while Evercore ISI sets it at $365, representing approximately a 16% upside from the current share price of $315.
Evercore ISI stated that the iPhone 18 Pro series products will help the iPhone maintain its growth momentum and drive upgrades among users who have been using their devices for three years or more.