BofA Securities Reiterates Buy on Apple, $380 PT

BofA Securities analyst Wamsi Mohan reiterated a Buy rating and $380.00 price target on Apple (NASDAQ: AAPL).

“In an exclusive interview with the Wall Street Journal (reported on June 17), outgoing CEO Tim Cook noted that Apple is forced to raise pricing to offset the impact of escalating memory costs.

We had already expected Apple to raise pricing and had reflected about $100 price increase in our prior estimates.

With CEO Cook confirming the pricing lever and the continued rise in memory pricing, we raise pricing by an additional $100 on the Pro and Pro-Max models.

We leave the base model unchanged and leave the Air ASP as is (already reflecting $100 increase).

This strategy, in our opinion, leverages share gains at the lower end and pushes prices higher in the more inelastic segments. Reiterate Buy.

We assume that the pricing goes up for Mac, iPad as well and we commensurately lower unit demand for all product categories marginally.

We think there could be an additional 100bps of gross margin headwinds in products but expect services margins to remain stable with some potential upside to be a potential offset.

We also expect Apple to offset some of the component price increases by additional offsets in other areas of the bill of materials.

We also see some potential offsets from recycled/recovered materials, lowering overhead and other supply chain efficiencies.”