Apple (AAPL) Stock: Why Wall Street Remains Bullish Amid Rising Memory Costs

Key Takeaways

Table of Contents

Citi maintains Buy rating on Apple with $315 target while reducing 2026 EPS forecast by $0.06 and 2027 by $0.04.
Industry-wide DRAM price increases expected to hit 50% in Q2 2026 and double by year-end.
Memory components represent approximately 9% of iPhone production costs and 15% for iPad and Mac devices.
Apple faces an estimated 140 basis-point margin headwind in 2026, declining to 48 basis points the following year.
Recent launches including the $599 iPhone 17e and $599 MacBook Neo demonstrate Apple’s cost management capabilities.

A memory cost crisis is brewing in the smartphone industry. According to a weekend research note from Citi analyst Atif Malik, DRAM component pricing is poised for dramatic increases — jumping 50% in the second quarter of 2026 and doubling during the latter half of the year. While this poses challenges for hardware manufacturers generally, Apple’s situation deserves closer examination.

Apple Inc., AAPL

Citi has adjusted its earnings projections for Apple, reducing fiscal 2026 EPS by $0.06 and 2027 estimates by $0.04 to account for compressed margins from elevated component expenses. Nevertheless, the firm stands by its Buy recommendation and $315 valuation target.

Monday morning saw Apple stock decline approximately 0.7% to $255.81. The shares have already dropped roughly 5.3% since the start of the year.

Memory components represent a substantial expense category for Apple. Citi’s analysis shows these parts constitute about 9% of iPhone manufacturing costs and reach 15% for iPad and Mac products. Given the projected price trajectory, the financial impact could be significant.

However, Malik contends that Apple possesses superior capabilities to navigate this challenge compared to industry peers.

“We believe Apple’s procurement team and purchasing strategies have improved over the years,” he stated. “And Apple likely has the best negotiation power among all smartphone vendors.”

Margin Compression Looms

According to Citi’s projections, the memory cost surge will create a 140 basis-point headwind on Apple’s gross profit margins during 2026. This pressure moderates to 48 basis points in 2027 as DRAM pricing stabilizes. Forecasts for 2028 remain unaltered.

Competing manufacturers with weaker negotiating positions will likely experience more severe impacts. Citi suggests this disparity could actually benefit Apple by enabling market share gains as rivals grapple with cost management challenges.

Citi hasn’t modified its iPhone volume projections — anticipating 1.3% growth in 2026 reaching approximately 246 million units, followed by 5.9% expansion in 2027 to roughly 262 million units.

Strategic Pricing Moves Demonstrate Agility

Apple unveiled two unexpected products last week with significantly reduced entry prices. The iPhone 17e launches at $599, substantially below the $799 starting point for the standard iPhone 17. Meanwhile, the MacBook Neo debuts at $599 — a 40% reduction versus the prior MacBook Air’s $999 price tag.

Evercore ISI analyst Amit Daryanani interpreted these announcements as proof that Apple is navigating inflationary pressures more effectively than market valuations suggest.

“We think investors are underappreciating how well AAPL is perhaps managing through the memory inflation issue,” Daryanani observed. Evercore assigns an Outperform rating with a $330 target price.

Malik also emphasized Apple’s flexibility in adjusting its product pricing matrix and modifying component specifications to counterbalance cost increases. The company has already implemented price increases on select MacBook configurations while maintaining iPhone pricing stability in certain markets.

The analyst referenced Apple’s services division and artificial intelligence initiatives as additional supporting factors. An anticipated Siri enhancement utilizing Google’s Gemini platform is scheduled for release this year. Apple’s device ecosystem encompasses approximately 2.5 billion active units worldwide.

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