AAPL Stock Gets Downgrades As Wall Street Sees Memory Inflation Pressures Persisting For 'Several More Quarters'

• China Renaissance downgraded Apple to ‘Hold’ from ‘Buy’ with a $280 price target after the company’s fourth-quarter guidance fell short of expectations.
• The firm said memory inflation is likely to persist for “several more quarters,” warning that slower growth in Apple's high-margin services business may not be sufficient to offset higher memory costs.
• Phillip Securities echoed similar sentiments, noting that supply constraints, rising memory costs and evolving AI regulations continue to weigh on Apple's near-term outlook.

Shares of Apple Inc. (NASDAQ: AAPL) were in focus on Tuesday after multiple firms downgraded the iPhone maker following its fiscal third-quarter (Q3) results, with analysts warning that persistent memory cost inflation and slowing services growth could weigh on earnings over the coming quarters.

According to TheFly, China Renaissance, DZ Bank and Phillip Securities downgraded AAPL stock, citing a combination of rising component costs, supply constraints and uncertainty around the pace of returns from Apple Intelligence.

Apple shares were up more than 1% in Tuesday’s opening trade.

Memory Costs Emerge As Key Concern For AAPL

China Renaissance downgraded Apple to ‘Hold’ from ‘Buy’ with a $280 price target after the company’s fourth-quarter (Q4) guidance fell short of expectations.

The firm said memory inflation is likely to persist for “several more quarters,” warning that slower growth in Apple's high-margin services business may not be sufficient to offset higher memory costs.

China Renaissance expects elevated component pricing to remain a headwind as Apple continues expanding AI capabilities across its devices, putting additional pressure on margins in the near term.

Analysts Cite AI, Supply Challenges

DZ Bank also downgraded Apple to ‘Hold’ from ‘Buy’, assigning a $310 price target, while Phillip Securities cut its rating to ‘Reduce’ from ‘Neutral’ and maintained its $290 price target.

Phillip Securities echoed similar sentiments, noting that supply constraints, rising memory costs and evolving AI regulations continue to weigh on Apple's near-term outlook.

The firm also said there is still no clear evidence that Apple Intelligence is driving a meaningful upgrade cycle for the company's products, leaving investors waiting for stronger signs that its AI investments will translate into higher device demand.

AAPL CEO Tim Cook Flags Supply Chain Constraints

Apple CEO Tim Cook said the iPhone maker is seeing less flexibility in its supply chain than usual, while adding that the impact of these constraints is expected to “increase significantly” in the near-term.

“We're seeing some very significant constraints currently with limited flexibility in the supply chain to remedy it. For September, we expect to pay even higher memory costs,” he said during a post-earnings call with analysts.

Apple reported earnings per share (EPS) of $2.02 on revenue of $109.4 billion in Q3, while Wall Street expected an EPS of $1.89 on revenue of $108.96 billion, according to Fiscal.ai data.

AAPL Seeks Preliminary Injunction, But OpenAI Pushes Back

According to a Reuters report, Apple on Monday asked a U.S. judge for a preliminary injunction barring OpenAI and two former Apple employees from accessing, using or disclosing what it alleges are confidential trade secrets tied to its consumer hardware efforts.

The iPhone maker also requested expedited discovery, including documents and depositions from the former employees, OpenAI personnel and corporate representatives from OpenAI and io Products, arguing it would suffer "irreparable harm" without immediate court intervention.

OpenAI said that Apple’s injunction request was “based on false information.” In a blog post, the ChatGPT maker said it does not have and does not want Apple's trade secrets, accusing the company of filing an aggressive lawsuit after previously telling the company it was “resolving any issues.”

OpenAI also argued that Apple's allegations stem partly from the company's own failure to promptly revoke former employees' access to internal systems after they left.

What Retail Traders Think Of AAPL Stock

Retail sentiment on Stocktwits around Apple trended in the ‘extremely bullish’ territory, with message volumes at ‘high’ levels at the time of writing.

AAPL stock is up 13% year-to-date and 51% over the past 12 months. The S&P 500 ETF Trust (SPY) is up 21% over the past 12 months, while the Invesco QQQ Trust (QQQ) is up 27%.

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