Apple Inc. (AAPL) shares have come under pressure after the company raised prices on several MacBook and iPad models.
But some Wall Street analysts believe the pullback could present a buying opportunity as the company leverages its pricing power and loyal customer base.
Apple stock fell 6.1% on Thursday after the company announced price increases of roughly 15% to 25% on select Mac and iPad products.
The company has pointed to rising component costs, particularly for memory and storage, as demand for semiconductors used in artificial intelligence applications continues to outpace supply.
The stock recovered modestly on Friday, rising 1.95%.
However, Apple shares remain down about 8% this month and are on pace for their weakest monthly performance since December 2022, according to Dow Jones Market Data.
Rising component costs fuel pricing adjustments
The recent price increases come as technology companies grapple with surging costs for memory and storage components that are increasingly required to support artificial intelligence capabilities.
Higher component costs have created margin pressures for hardware makers, prompting Apple to pass some of those costs on to consumers through higher pricing.
Investors initially reacted negatively, expressing concerns that more expensive consumer electronics could weaken demand, particularly as inflation remains elevated and consumers continue to prioritize essential spending over discretionary purchases.
However, some analysts believe Apple’s customer base and ecosystem position it differently from other hardware companies.
Morgan Stanley maintained its Overweight rating and $360 price target on Apple, arguing that the company’s ecosystem and financing options could help cushion any potential demand impact.
“If Apple’s demand remains relatively inelastic — as history would generally indicate given the stock ecosystem lock Apple has on customers — these price hikes could drive upside to both revenue and earnings vs. our current estimates,” Morgan Stanley analyst Erik Woodring wrote on Thursday.
Wall Street sees resilience in Apple’s customer base
Analysts note that Apple has built a highly integrated ecosystem that encourages customers to continue purchasing the company’s products and services.
Morgan Stanley said many consumers spread device purchases over several years through financing programs, reducing the monthly effect of higher prices.
The firm also suggested that Apple’s software and hardware ecosystem makes purchasing decisions less sensitive to moderate price increases.
Nancy Tengler, chief executive officer of Laffer Tengler Investments, shares a similar view.
“Consumers will spend less on something else if they absolutely must have a Mac Pro,” Tengler said in a Barron’s report on Friday.
Wedbush also reiterated its bullish stance on the stock.
The firm maintained its Outperform rating and $400 price target, implying substantial upside from Thursday’s closing price.
Wedbush’s Dan Ives said Apple remains well-positioned to raise product prices without materially damaging demand or increasing customer churn, citing the company’s growing emphasis on premium products and higher-income consumers.
Attention turns to the next iPhone launch
The company’s biggest pricing test may still lie ahead.
Apple has not raised prices on its most important product category, the iPhone.
Analysts believe future iPhone models could become more expensive as memory requirements increase to support advanced artificial intelligence features and rising component costs continue to pressure margins.
Even so, Morgan Stanley believes Apple will seek to balance profitability with maintaining demand.
“Apple prioritizes protecting gross profit dollar growth — rather than gross margins — on iPhones to limit demand elasticity on its core hardware product while also supporting installed base expansion,” Woodring said.
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