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Apple Doesn't Risk Customer Churn Following Price Increases, Wedbush Says

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Apple Doesn't Risk Customer Churn Following Price Increases, Wedbush Says

Apple (AAPL) is unlikely to lose customers as a result of the iPhone maker increasing prices on its MacBook and iPad products, Wedbush Securities said in a note Thursday.

MacBook Neo now costs $699 versus $599 previously, while the price of MacBook Air with 512 gigabytes of storage rose to $1,299 from $1,099, multiple media outlets reported. The MacBook Pro with 1 terabyte of storage moved to $1,999 from $1,699.

Apple raised the price of iPad Air with 128 gigabytes of storage to $749 from $599 and the iPad Pro to $1,199 from $999.

"While Apple is well known for using its huge memory and storage purchases as leverage to secure low prices, the current memory price increases have forced Apple's hand to raise prices," Wedbush analysts including Dan Ives wrote. "The company is in a strong position to increase prices without sacrificing hardware performance and risking increasing customer churn given the company's increasing focus on the higher-end consumer."

IPhone prices remained unchanged.

Last week, Apple Chief Executive Tim Cook told The Wall Street Journal that price increases "are unavoidable" amid surging memory costs.

"The consumer electronics industry is facing an unprecedented challenge," the company said in a statement to CNBC. "The rapid expansion of (artificial intelligence) data centers has created an extraordinary surge in demand for memory and storage. We have never seen a component price increase this much, this quickly."

The company didn't respond to' request for comment.

Apple's shares fell 4.7% intraday Thursday, and are up 2.7% year-to-date.

US President Donald Trump recently said that Apple had agreed to work with Intel (INTC) to design and build chips in the US.

That partnership should help the iPhone maker diversify its supply chain and ease margin pressures stemming from soaring memory and storage costs.

"This partnership acts as a strategic move to design and build chips in the US with Apple looking to diversify its manufacturing base and add new chip capacity," the analysts wrote.

The company's fiscal second-quarter results exceeded Wall Street's estimates at the end of April, driven by an iPhone revenue beat.

Wedbush maintained an outperform rating on Apple's stock, with a $400 price target.

Price: $279.94, Change: $-13.23, Percent Change: -4.51%

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