Shares of Apple Inc. (AAPL) moved higher on Friday even after Bernstein cautioned that rising memory chip costs could squeeze the company's margins in the December quarter.

The stock opened the session at $335.92 and traded up 0.49% to $337.56. The gain came despite a detailed warning from Bernstein analyst Mark Newman, who maintained his Outperform rating and $370 price target on the stock while flagging downside risk to Apple's profitability during the holiday quarter. Newman's note pointed to trouble ahead for the holiday quarter even as the firm kept its constructive stance on the shares.

Why Memory Costs Are the Problem

Newman's team ran a granular bill of materials analysis and found that memory chip costs are set to eat into Apple's gross margin more than the market currently expects. DRAM, which supplies a device's working memory, and NAND, which handles long-term data storage, together make up roughly 90% of an estimated $168 year-over-year increase in the cost of the 256GB iPhone 18 Pro Max — a steep jump for a single component category.

Based on that work, Bernstein now forecasts an iPhone gross margin of 40.4%, approximately 390 basis points below Street expectations. Total company gross margin is projected at 46.2%, a figure that sits about 50 basis points under consensus.

Stronger pricing in overseas markets is helping to soften the blow. Bernstein estimates the average international iPhone price increase is running about 1.3 percentage points above U.S. pricing, and without that cushion the margin picture would look considerably worse. Using U.S. prices alone, the firm's model points to an iPhone margin of just 39.6%, with the companywide figure dropping to 45.8% under that scenario.

Bernstein also cut its fiscal first-quarter EPS estimate to $2.87 from $3.00, leaving the projection 2% below the consensus figure of $2.92. The fiscal first quarter aligns with the December period highlighted in the margin warning.

Higher-end iPhone models are expected to make up 70% of unit sales this cycle, a mix that should provide some help. Bernstein, however, does not expect it to fully offset the cost pressure, since demand remains concentrated in the lower-margin 256GB storage tier.

Institutional Buying Continues While Analyst Views Stay Mixed

Despite the margin warning, institutional investors have continued to build positions in the stock. Portland Investment Counsel disclosed a new position in Apple during the second quarter, purchasing 7,5 shares worth approximately $2.18 million, making it the firm's 22nd-largest holding.

Other funds made moves as well. Ascentis Wealth Management grew its position by 822.7%, while several smaller firms opened new stakes ranging from $30,000 to $109,000. Institutional investors now hold 67.73% of Apple's outstanding stock — a level of ownership that reflects continued interest from professional money managers despite the margin warning.

Analyst opinion on Apple remains split. Robert W. Baird raised its price target to $330 and kept an Outperform rating in July, while Barclays maintained an Underweight rating with a $245 target. MarketBeat data shows Apple carries a Moderate Buy consensus with an average price target of $340.14, comprising one Strong Buy, twenty-six Buy, thirteen Hold, and two Sell ratings. Bernstein's $370 target, maintained alongside its margin warning, sits above that consensus average.

Apple's most recent earnings report, posted July 30, showed EPS of $2.02 against estimates of $1.89. Revenue came in at $109.42 billion, up 16.4% from the year-ago quarter. The company also renewed its global patent licensing agreement with Qualcomm, effective April 1, 2027.

Apple's 52-week trading range currently sits between $243.42 and $345.34, a band that leaves Friday's $337.56 trading level roughly 2% below the high.

Bernstein's revised estimates place the firm below Street models on both iPhone and companywide margins heading into the December quarter, even as its rating and price target remain unchanged. Apple's fiscal first-quarter results will offer a direct read on that divergence, with reported margins and EPS measured against Bernstein's $2.87 estimate and the Street $2.92 consensus.