The next boost to Apple's stock could come from an iPhone price hike

By Christine Ji

Morgan Stanley is betting that strong iPhone demand will allow Apple to raise prices and still grow sales and earnings

Morgan Stanley estimates that the iPhone 18 lineup could see a $200 price increase from the previous generation.

As consumers brace for higher electronics prices, Apple's pricing power is putting the company on track for an earnings boost amid a global memory crunch.

In a Tuesday note titled "Higher Prices Begets Higher Earnings," Morgan Stanley analyst Erik Woodring wrote that revenue upside is in store for Apple (AAPL) as it raises prices across its product lines to protect margins from increasing component costs. According to Morgan Stanley, this pricing strategy could drive a 2% to 4% upside to the company's third-quarter earnings per share, and about a 1% lift to its full-year fiscal 2027 earnings.

Woodring maintained his overweight rating and $360 price target on the stock, which implies roughly 15% upside from current levels.

Apple products are highly inelastic, meaning that consumer demand is not very sensitive to changes in price. "We estimate historical elasticity of iPhone is 0.2 to 0.5 - making it Apple's most inelastic product - while Mac/iPad elasticity is 0.8 to 1.0," Woodring wrote. That means a 10% increase in iPhone prices would only result in a 2% to 5% drop in unit shipments.

While prices haven't been confirmed for the upcoming iPhone 18 lineup, Woodring believes a $200 price hike across all models is increasingly likely.

The artificial-intelligence boom has led to memory shortages and skyrocketing prices. Morgan Stanley estimates that average DRAM costs for Apple will rise around 370% between fiscal 2025 and 2027, while NAND costs will increase 280% over the same time period.

In June, Apple raised prices on its MacBooks and iPads after CEO Tim Cook said that price increases had become "unavoidable."

"Notably, despite these pricing actions, we have not observed any meaningful changes in Mac or iPad lead times," Woodring wrote. "If these relationships remain intact, higher pricing should be a net positive for revenue [and] revenue growth."

Apple's strong reputation makes it unique among electronics makers. Analysts have previously speculated that the company is better positioned than competitors to gain market share, as it can more easily pass on rising costs to loyal consumers.

Price increases are "unlikely to materially disrupt demand, especially considering supply challenges at peers," Woodring wrote. "Rising component costs are mitigated given Apple's bargaining power against consumers and the supply chain."

If memory costs remain elevated, Apple may be forced to raise prices again in fiscal 2028, Woodring added, although he flagged that it's difficult to speculate about future pricing strategy.

Thus far, shares of Apple have outperformed in 2026 in the face of supply-chain constraints. They've risen 16% year-to-date, making Apple the best-performing "Magnificent Seven" name. The company has taken more dramatic steps to advance its AI strategy this year, such as unveiling a new AI-powered Siri during its Worldwide Developers Conference last month.

An agentic Siri will pave the way for a long-term "AI-driven replacement cycle," while new products such as a foldable iPhone will strengthen iPhone demand through 2028, Woodring noted.

-Christine Ji

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