John Ternus's First iPhone Launch Prompted a Bank of America Price Target Cut. Is Apple Stock a Buy?

John Ternus made history by hosting his first iPhone launch event as Apple CEO, unveiling the iPhone 18 Pro and Pro Max, alongside Apple's first foldable iPhone, the Duo. Following the debut, Bank of America's analyst Wamsi Mohan maintained a buy rating on Apple stock but lowered his price target from $380 to $370. While Mohan is generally optimistic about Apple, he found the new iPhone models were priced higher than anticipated, which could potentially result in increased sales at lower margins.

This concern arose due to the surging memory costs, as demand for data center memory processors had driven up prices. Apple addressed this issue by increasing Mac prices earlier this year, and the new iPhone 18 Pro and Pro Max prices were adjusted to counter the rising memory costs. However, absorbing these costs could negatively impact Apple's margins, which are already expected to drop to 47% to 48% for the fourth quarter, down from 50% in the third quarter.

Despite this, Gene Munster of Deepwater Asset Management believes up to one-third of Pro Max owners may switch to the new Duo, which starts at $1,999. If this occurs, the Duo could account for 10% of total iPhone revenue in 2027, potentially boosting iPhone margins. Ternus has a substantial cash reserve of over $39 billion for new product, service, and acquisition development, providing Apple ample time to navigate the memory price storm.

With over 2.5 billion active Apple devices globally and a strong foundation in high-end products, Apple remains popular and could spur new upgrade cycles. Even if the new iPhone 18 Pro and Pro Max have slightly lower margins, the sales of the premium Duo could help offset some of the margin impact. However, while Apple's products are in high demand, Stock Advisor's analysts did not include Apple in their top 10 stock picks, suggesting other opportunities may exist.