Apple, a manufacturer and distributor (mainly) of iPhones and Mac computers, announced significant price increases for its products on Thursday - price rises reaching several dozen percent.
The market reacted negatively, with the company’s shares down more than 5%.
APLE.US (D1)
The company’s valuation remains in a long-term, expanding uptrend. FIBO projections indicate a strong resistance zone between $260–240. This zone will coincide with the (potential) lower boundary of the rising channel—which means that deepening the downward correction will become an increasingly bigger challenge for sellers. It is also worth noting the EMA100 crossing above the EMA200 from below, which can be interpreted as a strong bullish signal. Source: xStation5
In a standard market context, raising prices in this way would signal the company’s confidence in demand for its products, and investors would have flowed into the stock on expectations of higher margins.
In this particular case, however, the company clearly states that the price hikes are the result of rising RAM memory prices. Computers and phones must compete for memory supply with data centers and the enormous budgets of the largest AI-related corporations.
As a result, the market does not see margin expansion, only a desperate attempt to defend margins. A defense that, it should be noted, may not be effective. Why?
Based on rough estimates and independent analyses, the cost of RAM in Apple products is around a dozen or so percent of total production costs; however, this share increases as a given machine’s configuration becomes more advanced.
At the same time, over the past year, memory prices in the segment in which Apple operates have risen by about 150–200%. Price increases of around 20%, with a cost share in the neighborhood of 10–20%, mean that the current hikes can only offset the increase in costs, with no hope of margin expansion and with expected pressure on sales growth.
It should also be remembered that there is no sign of an end to this “cycle” in the forecasts or results of companies in the memory or semiconductor sectors. In the worst case, this may be only the first of many price increases.
These events and their implications may partially be one of the bearish factors for the broader market. Investors must, should, and will increasingly begin to price in supply chains stretched to the limit and rising electronic component costs across the entire market, not just for selected companies.
Such speculation could spill over, for example, into the valuations of Take-Two, which is rising on expectations surrounding GTA VI. Component shortages and higher prices may discourage or prevent many consumers from trying Rockstar’s new release.
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