Apple may be facing a deeper profitability squeeze than investors expect, according to a new report from Lynx Equity Strategy, which warns of “further downside” in the stock despite its roughly 10 percent year-to-date decline.
Access deep analyst research only on InvestingPro — 55% off The firm said its checks show Apple is confronting “the unpleasant prospect of an abrupt spike up in NAND flash pricing” after negotiations with long-time supplier Kioxia deteriorated.
Lynx Equity Strategy wrote that “bad blood” has emerged after Kioxia’s lower long-term-agreement pricing for Apple caused a “margin shortfall” at the supplier.
As a result, Kioxia “may be shipping to Apple less than Apple’s forecasted demand,” pushing the iPhone maker to seek alternative supply.
That shift has major cost consequences. The analysts said Apple has been “forced to approach Samsung to fill the supply shortfall,” and without long-term agreements in place, Samsung is “free to quote current market price,” which could be far higher.
An overnight report from Taiwan cited by the firm indicates Samsung “may have ratcheted up NAND pricing by as much as 100%,” with Lynx suggesting Apple is likely among the customers affected.
Beyond cost pressures, Lynx warned of technical risks. Apple’s flash controller is “optimized for Kioxia’s NAND process,” and the firm said the controller “will not work well with Samsung’s NAND process,” raising the likelihood of performance issues and potential customer returns.
“The Street is underestimating the impact,” Lynx wrote, adding that both margins and the stock may face additional pressure ahead.
