TLDR
- Apple stock fell 2.76% after iPhone 17 launch but analyst Ben Reitzes raised price target to $290 from $260
- New iPhone Air model priced at $999 could boost average selling prices by cannibalizing cheaper models
- iPhone Pro price increased $100 to $1,099 with new 2TB storage option on Pro Max
- Google antitrust ruling allows continued revenue-sharing payments to Apple worth roughly $20 billion annually
- Analyst expects iPhone Air’s thin design to drive upgrade cycle, especially in China market
Apple stock dropped 2.76% Wednesday following the iPhone 17 launch event. The decline came as investors focused on the unchanged $799 base model price. However, Melius Research analyst Ben Reitzes sees this reaction as missing the bigger picture.
Reitzes maintained his buy rating and raised his price target to $290 from $260. This represents the highest target among analysts tracked by FactSet. The new target suggests nearly 24% upside potential for Apple shares.
The centerpiece of Tuesday’s event was the iPhone Air model. This ultrathin device carries a $999 price tag and replaces the midrange Plus model. The Air’s positioning could shift Apple’s product mix toward higher-end devices.
“The main thing is the $999 price point is likely to cannibalize much of the lower-priced models,” Reitzes wrote. The analyst believes this will improve the overall product mix for Apple.
iPhone Pricing Strategy Drives Revenue Potential
Apple also raised the iPhone Pro price by $100 to $1,099. The Pro Max now includes a 2-terabyte storage option. These changes add more expensive models to Apple’s lineup.
The iPhone Air’s design could have particular appeal in international markets. Reitzes thinks the form factor may help Apple’s market share in China. The stylish design might generate more interest than in the skeptical US market.
Apple stock historically performs poorly around iPhone launches. The stock typically drops an average of 2.07% between announcement and release dates. This year’s decline follows that pattern.
The new iPhones set the stage for future innovations. Reitzes mentioned potential products like foldable phones, glasses, and AirPods with cameras. These could drive future growth cycles for the company.
Google Partnership Provides Revenue Boost
A recent antitrust ruling cleared Google to continue paying Apple for default search placement. This partnership generated approximately $20 billion in payments to Apple in 2022. Analysts estimate similar annual amounts continue today.
“We remain very pleased with the recent Google Antitrust ruling,” Reitzes stated. He expects Apple will see higher revenue than previously modeled from search monetization. The ruling also opens doors for potential AI partnerships.
The AirPods Pro 3 received praise for its live translation features. Reitzes called the capability “awesome” and worthy of upgrading. This could help stabilize Apple’s declining wearables category.
Apple has faced challenges this year including AI strategy concerns and tariff worries. The iPhone launch positions the company to catch up with other Big Tech firms. The stock remains down 6% year-to-date despite recent gains.
Reitzes expects Apple will eventually deliver promised AI upgrades to Siri. Recent reports indicate Apple is testing Google-developed AI models for search tools. “We know that Siri-gate was frustrating but don’t think Apple is losing share,” he wrote.
The analyst bases his $290 target on 30 times projected fiscal 2027 earnings. This valuation reflects confidence in Apple’s ability to drive higher revenues through the new iPhone lineup and service partnerships.
