Key Moments
- Rothschild & Co Redburn raised its rating on Apple to Buy from Neutral and lifted its price target to $400 from $260.
- The firm expects a new foldable iPhone, priced at $2,199, to drive higher iPhone average selling prices and incremental unit growth by fiscal 2027.
- Analysts project iPhone revenue and total earnings to run materially above consensus from fiscal 2026 through fiscal 2030, despite flagged execution and demand risks.
Rating Upgrade and Target Hike
Rothschild & Co Redburn has upgraded Apple Inc. (NASDAQ:AAPL) to Buy from Neutral and boosted its price target to $400 from $260. The research team cited Apple’s planned entry into the foldable smartphone segment and a shift in its artificial intelligence approach as the key drivers behind the more optimistic stance.
AI Strategy: From Disappointment to “Fast Follower 2.0”
The analysts, led by Timm Schulze-Melander, noted that the company’s current AI initiative, marketed as Apple Intelligence, has not met expectations to date. They highlighted that Apple is using a tailored version of Google’s Gemini model to power certain capabilities, including an updated Siri.
According to the note, Apple is paying Google about $1 billion per year for Gemini access, while still receiving $27.5 billion annually from Google for search placement across its devices.
The team argued that Apple could improve its strategic position by embracing open-source AI architectures, potentially through collaboration with Nvidia. They described this prospective direction as “Fast Follower 2.0.”
The analysts pointed to Nvidia’s Nemotron family of models, stating that it “matches closed, frontier model performance” and could help lessen Apple’s dependence on Google. At the same time, they acknowledged that Apple and Nvidia have had a “genuinely acrimonious” relationship in the past.
Foldable iPhone Seen as Major Growth Catalyst
The upgrade is also anchored in expectations for Apple’s first foldable iPhone, which the firm expects to debut in September. Redburn projects that this foldable device, referred to as the iPhone Ultra, will reach 14 million units in fiscal 2027. Of that total, only 4 million units are anticipated to displace sales of conventional iPhones, implying a largely additive effect on volumes.
Redburn estimates that the foldable model will be priced at $2,199, representing an 83% premium to the iPhone 17 Pro Max.
Historical Precedent and ASP Outlook
The analysts pointed to Apple’s track record of expanding the categories it enters. They referenced AirPods and Apple Watch, stating that these products captured 65-75% of incremental unit growth in their respective markets following launch.
Building on that history, Redburn expects the forthcoming foldable iPhone to lift the iPhone portfolio’s average selling prices by 11% by June 2027.
Financial Projections vs. Consensus
The broker’s projections for iPhone revenue are positioned above market expectations for an extended period. For fiscal years 2026 through 2030, its iPhone revenue estimates are 3-14% higher than consensus. Over the same time frame, Redburn forecasts that Apple’s total earnings will exceed consensus by 8-18% by fiscal 2030.
| Metric | Redburn View | Relative to Consensus | Timeframe |
|---|---|---|---|
| Apple rating | Buy (upgraded from Neutral) | – | – |
| Price target | $400 | Raised from $260 | – |
| Foldable iPhone unit forecast | 14 million iPhone Ultra units | – | Fiscal 2027 |
| Cannibalization of traditional iPhones | 4 million units | Out of 14 million foldable units | Fiscal 2027 |
| Foldable iPhone estimated price | $2,199 | 83% premium to iPhone 17 Pro Max | – |
| iPhone ASP impact | +11% | – | By June 2027 |
| iPhone revenue vs. consensus | Above consensus | 3-14% higher | Fiscal 2026-2030 |
| Total earnings vs. consensus | Above consensus | 8-18% higher | By fiscal 2030 |
Key Risks: Execution, Engineering, and Consumer Demand
Despite the constructive outlook, Redburn flagged several risks to its thesis. These include the possibility of production delays affecting the foldable device and technical hurdles related to display “crease visibility” and hinge durability. The note also underscored the ongoing risk associated with Apple’s reliance on external AI models.
On the demand side, the analysts referenced mixed consumer survey data. They cited a 2023 CNET poll indicating that 64% of respondents did not want a foldable handset. In contrast, they noted a more recent Forbes survey suggesting that 61% of consumers “would gain immediate confidence” in the foldable category if Apple were to enter the market.
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