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Investing.com -- Apple (NASDAQ:AAPL) may soon be forced to raise iPhone prices, according to Moffett Nathanson, which points out that the combination of surging tariffs and a wave of aggressive promotional offers is creating unsustainable pressure on margins.
The Wall Street research outfit maintains a Sell rating on Apple with a $184 price target.
The issue stems largely from tariffs imposed on smartphones assembled in China, which account for nearly all iPhones sold in the U.S.
“Apple faces as much as a 54% increase in the cost of an iPhone assembled in China,” Craig Moffett, Senior Managing Director at Moffett Nathanson, highlights.
“We won’t know for some time how much of this increase will be absorbed by suppliers and how much by Apple itself in the form of lower margins, but it seems inevitable that prices – both to end users and carriers – will rise, potentially quite sharply.”
In the near term, the threat of rising prices may even accelerate demand, as consumers rush to upgrade before hikes take effect. But that would likely push promotional costs even higher, amplifying the squeeze on average revenue per user (ARPU).
Moffett warns that “higher promotional values directly increase promotional amortization,” with recent offers already at record levels. According to third-party data from Navi, promotions for both switchers and existing customers surged in Q1 across the Big Three carriers, reaching new all-time highs.
That trend comes at a time when carriers are already under pressure to sustain net subscriber additions, making it difficult to dial back promotional spending. If prices rise sharply and carriers choose not to increase subsidies further, “customers will presumably instead choose to just keep their old devices even longer,” the report notes.
Apple’s pricing decisions will be key, particularly if tariffs remain in place and costs rise as expected. And while the company may absorb part of the impact to protect demand, rising end-user and carrier prices will be difficult to avoid.