Jahanara Nissar

The product launch event today should provide clarity for investors on two counts – the pricing of products and the timing of their availability. On both counts, we expect AAPL to run into rough weather.

Investors assume the impact of product price increases could be softened by offering consumers monthly payment plans. This may be so for customers buying online or at an Apple store. However, customers shopping for iPhones at retail stores are likely to experience sticker shock when compared to Samsung flagship models. We expect significant price differentials with Samsung vs. previous generations of comparably priced flagship models.

Our checks show telcos have cut their intake of iPhone 18 due to the price increase vs. procurement plans for iPhone18 they made last year. It should come as no surprise if telcos choose to stock more inventory of Samsung’s lower priced flagship models. Consensus estimates model unit volume of new products flat to up from the previous generation. Unit volumes next year are trending down y/y, we think

The base model of iPhone18 is pushed out to next year, we think due to lack of availability of memory and flash. We think the much-anticipated iPhone Fold model too could become available only next year. The reason? Unavailability of foldable display screens.

The problems Apple’s new products face are twofold in our view – Sticker shock and product availability. Apple may not have made arrangements to assure sufficient supply of DRAM and flash for its Fy27 product lineup. Samsung may have seized the advantage in being vertically integrated by prioritizing its memory, flash and display supply for its internal handset division.

We expect the incoming CEO to face a difficult Fy27 as unit volumes drop y/y. We were negative into Apple’s recent earnings (link). We were not surprised with the lower than expected FQ4 guidance and the subsequent drop in stock price. We maintain our negative stance and our $250 PT.

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In a position of weakness: The incoming CEO is expected to dazzle investors and Apple customers with a range of new products. However, Apple most important product continues to be the iPhone. Apple raised the DRAM content in iPhone18 by 50% from iPhone17’s 8GB, but without locking up supply. We think the outgoing CEO fell behind the curve in locking up supply of memory/flash, likely impacting Apple’s performance in Fy27. The global supply of memory in 2027 has already been allocated, our checks show. We expect it will take a year for the incoming CEO to fix the problem.

Samsung S26 vs. iPhone18 – sticker shock: The iPhone 18 models launched today will be price-compared by value conscious shoppers to comparable Samsung models. The base model of iPhone18 will be price-compared to Samsung Galaxy S26 FE launched two weeks ago. Samsung lists this model at $700 for 128GB and $800 for the 256GB version. The iPhone18 Pro is likely to be price-compared to S26 Ultra listed at $1200 for the  256GB version.

Samsung Fold vs. iPhone Fold – delayed availability: iPhone Fold pricing will be compared to Samsung’s foldable Galaxy Z Fold series priced at $1800 and up. However, for consumers in the foldable market, pricing may not be a concern. These customers may value availability. The Samsung Fold models are available now. We think the iPhone Fold model may not be available this year. Customers may have to wait into 2027, we expect.

Why is this so? We believe the constraining factor is the availability of the display. We believe Apple Fold display is sourced from Samsung. Our checks show the unit availability of Samsung’s foldable display is limited, we think to less than 3mn units for the year. We believe the bulk of the capacity has been allocated to Samsung’s Fold model, leaving little room for Apple this year.

Samsung A series vs. refurbished iPhones: We expect Samsung to leverage its internal supply of DRAM and flash for gaining share from Apple not only at the premium end, but also by flooding the market with low-priced A-series models. Just as with the previous quarter, we expect Samsung’s Mobile division to run at a loss in order to gain market advantage by grabbing shelf space globally.

The highest running models within the A-series, the A17 and A18 models, are priced below $250. We expect these models to sell in the tens of millions, taking advantage of their easy access to Samsung’s internal supply of memory and flash. The A-series models are likely to give stiff competition to Apple’s refurbished iPhones.

Meanwhile in China: Huawei has taken market leadership position in the domestic China market, leveraging its access to China’s CXMT and YMTC fabs. As for Oppo/Vivo, our checks show they have locked up DRAM supply from Taiwan memory suppliers and flash supply from Kioxia. We expect iPhones to fall in ranking in Fy27 behind handset companies with access to DRAM fabs in China and Taiwan.

Net/net: We believe investor expectations for Fy27 have not taken into account the shortfall in sourcing critical components. We are negative on the stock. We maintain our $250PT.

KC Rajkumar

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