Bernstein sees downside risk to Apple's December quarter results

Investing.com -- Bernstein kept its Outperform rating and $370 price target on Apple in a note on Friday, but it warned investors that rising memory chip costs could hurt the iPhone maker's gross margin and earnings in the December quarter.

"Our detailed BOM and mix analysis points to downside risk to Apple's December-quarter gross margin and EPS, although stronger international pricing provides a partial offset," analyst Mark Newman wrote. BOM is the bill of materials.

Bernstein cut its fiscal first-quarter EPS estimate to $2.87 from $3.00. The new figure is 2% below the consensus of $2.92, with the firm now forecasting iPhone gross margin of 40.4%, which is 390 basis points below consensus. It expects total gross margin of 46.2%, 50 basis points below consensus.

Using U.S. prices alone, Bernstein's analysis is said to have pointed to even lower margins of 39.6% for the iPhone and 45.8% for Apple overall. Larger price increases outside the U.S. partly offset the pressure.

Bernstein estimates the global average iPhone price increase is about 1.3 percentage points higher than in the U.S.

"The primary source of margin pressure is sharply higher memory costs," Newman wrote. He explained that DRAM and NAND memory make up about 90% of the estimated $168 year-over-year cost increase for the 256GB iPhone 18 Pro Max.

Bernstein expects higher-end models to make up 70% of units, which provides some support. However, it said this does not fully offset higher costs, because demand is concentrated in the lower-margin 256GB storage option.

Bernstein concluded that it still sees Apple as the gateway to consumer AI.

Original Article

You May Also Be Interested In

• Bernstein SocGen sees downside risk to Apple's December quarter gross margin and EPS
• Costco Wholesale (COST) PT Raised to $1,040 at DA Davidson Following Q4 Earnings
• JPMorgan Downgrades Thai Union Group PCL (TU:TB) (TUFBY) to Underweight