Tim Cook recently acknowledged that consumers should expect to pay higher prices for Apple products in the near-future as the company can no longer absorb surging costs for memory and storage components. This situation, the CEO noted, has become unsustainable even though the company is doing its best to mitigate it.
This pricing pressure has recently prompted one Wall Street firm bearish, raising the question about whether Apple has enough cushion to protect its margins without weakening demand.
On August 10, Jefferies downgraded Apple Inc. (NASDAQ:AAPL) from to Underperform from Hold and cut its price target to $263.66. The downgrade followed supply checks that reveal that the all-glass iPhone for September 2027 has been cancelled due to low-yield.
The Wall Street firm sees the potential cancellation as a “major” product setback because the premium device could have helped Apple raise average selling prices at a time when memory prices are surging.
Is Apple Losing a Key Pricing Lever
Analyst Edison Lee of Jefferies had believed that this all-glass body would eventually migrate to the iPhone Pro and iPhone Pro Max models, helping raise selling price and margin. However, the potential cancellation now leaves the foldable iPhone as the main potential driver of higher iPhone average selling prices and margins.
While Apple has historically been able to persuade its customers to buy premium products and configurations, an all-glass anniversary could have been a major step-up in the premium segment. If these supply chain checks are correct, Apple may have to rely more heavily on the foldable iPhones and incremental upgrades to increase average selling prices.
There’s also a demand-timing risk. Apple’s recently raised iPhone trade-in values for some iPhone models in Europe and US. According to Jefferies, this could support demand for the iPhone 17 but potentially put additional pressure on iPhone 18 sales.
Apple’s Numbers Tell a Promising Story
Apple’s latest earnings results stand in contrast to the bearish outlook discussed above. Fiscal third-quarter revenue for the tech giant jumped 16% year-over-year to $109.42 billion compared to $108.65 billion estimated. EPS came in at $1.91 adjusted versus the estimated $1.89. The company reported stronger-than-expected earnings and revenue were backed by a 22% increase in iPhone sales.
Based on the current numbers, it looks like consumers aren’t yet abandoning the iPhone ecosystem or even that Apple has lost its ability to monetize. A single future iPhone design setback doesn’t necessarily undermine the broader business.
Hedge Fund Positioning
Hedge fund positioning suggests investors haven’t yet embraced the bearish thesis either. According to Insider Monkey’s database, 170 hedge funds held Apple at the end of the first quarter of 2026, up from 169 in the prior quarter.
That trend compares favorably with fellow mega-cap technology company Microsoft Corporation (NASDAQ:MSFT). Microsoft remained considerably more popular overall, with 282 hedge funds holding the stock in Q1 2026, but down sharply from 312 funds in the previous quarter.
The contrast between the two mega-cap peers shows that participation in Apple remained broadly stable during a quarter when ownership of another mega-cap technology leader declined more noticeably.
Bottomline
Jefferies downgrade highlights a real risk: rising memory costs could pressure margins particularly since the uncertainty revolving around premium designs limits an important pricing lever. However, Apple’s robust demand and favorable hedge fund positioning suggests these concerns haven’t yet translated into a deterioration in investor confidence. For now, the downgrade looks more like a warning than an evidence of weakness.
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