Apple hit with trio of analyst downgrades over memory costs

Apple ↗ 0.52% shares faced a wave of analyst downgrades on Tuesday as Wall Street firms warned that rising memory chip prices will continue to erode the company's profit margins despite strong product demand.

A Trio of Downgrades

Phillip Capital downgraded Apple to "reduce" from "neutral" while maintaining its $290 price target, representing a decline from the stock's recent close. Analyst Helena Wang said that while demand for the iPhone 17 and MacBooks remains strong, a sharp rise in memory prices will undercut that momentum. "Memory inflation is becoming a major margin headwind," Wang wrote, noting that the DRAM market is dominated by just three suppliers, giving Apple "little sourcing flexibility".cnbc

DZ Bank also cut its rating on Apple to "hold" from "buy" with a $310 price target, citing memory cost inflation and supply constraints. China Renaissance similarly downgraded the stock to "hold" from "buy" with a $280 price target after Apple's fourth-quarter guidance fell short of expectations.finviz+3

Strong Earnings, Weak Outlook

The downgrades come after Apple reported record third-quarter earnings last week that beat analyst estimates on both revenue and earnings per share, driven by strong iPhone and Mac demand. However, the company issued weak guidance for the current period due to the global chip crunch, sending shares down nearly 10% following the report on Thursday.seekingalpha+1

Apple has already raised prices on iPads and Mac models in response to rising component costs, and some analysts expect iPhones to face a price hike in the near future. The memory shortage, which some on Wall Street have dubbed "RAM-ageddon," has been driven by surging demand for AI-capable devices that require substantially more DRAM and NAND flash.cnbc+1

Lingering Headwinds

Wang noted that Apple has partially offset the impact through lower-cost carry-in inventory, favorable product mix, and lower non-memory component costs, but said "these benefits are expected to diminish over time". She also flagged that Apple Intelligence has not yet given consumers a compelling upgrade reason, while regulatory hurdles in Europe and China — which together generate 44% of Apple's revenue — "could continue to limit the near-term monetisation of Apple Intelligence".cnbc

Despite the downgrades, Wall Street's broader consensus remains largely positive. According to LSEG data, 32 analysts maintain a buy or strong buy rating on the stock, while 13 rate it as hold and three give it an underperform.cnbc