Apple has received a bullish upgrade from Rothschild & Co Redburn, with analysts pointing to the company’s planned entry into the foldable smartphone market and a potential shift in its artificial intelligence strategy.
Redburn upgraded Apple to Buy from Neutral and raised its price target to $400 from $260.
The new target implies a 31% upside from Apple’s Friday closing price of $305.93.
Analysts led by Timm Schulze-Melander expect Apple to launch a foldable iPhone in September and forecast sales of 14 million iPhone Ultra units in fiscal 2027.
Of those, only around 4 million are expected to represent sales cannibalised from existing iPhone models.
The broker estimates the device will be priced at $2,199, representing an 83% premium to the iPhone 17 Pro Max.
Redburn believes Apple has a history of reshaping markets when it enters new product categories.
AirPods and the Apple Watch, for example, captured an estimated 65%-75% of incremental unit growth in their respective markets following their launches.
The analysts expect the foldable iPhone to lift Apple’s iPhone average selling price by 11% by June 2027.
AI strategy could offer another catalyst
Apple’s artificial intelligence efforts remain a concern, however, with Redburn describing its Apple Intelligence strategy as disappointing so far.
The company is relying on a customised version of Google’s Gemini model for some AI features, including the revamped Siri.
Apple reportedly pays Google around $1 billion annually for access to the model, while Google pays Apple about $27.5 billion a year for search placement across its devices.
Redburn believes Apple could reduce its dependence on Google by adopting open-source AI models, potentially in collaboration with Nvidia. The analysts described the potential approach as “Fast Follower 2.0”.
Nvidia’s Nemotron models could offer performance comparable to leading closed models, according to the analysts, although they acknowledged that relations between Apple and Nvidia have historically been strained.
An open-source approach could give Apple greater flexibility while reducing the costs and risks associated with developing frontier AI models internally.
Risks remain for the bullish case
Redburn forecasts Apple’s iPhone revenue to be 3%-14% above consensus estimates between fiscal 2026 and 2030.
Its overall earnings forecasts are 8%-18% above consensus by fiscal 2030.
However, delays to the foldable iPhone, problems with display crease visibility, and questions over hinge durability could undermine the investment case.
Consumer demand is another uncertainty.
A 2023 CNET survey found that 64% of respondents did not want a foldable handset, although a more recent Forbes survey found 61% said Apple’s entry would immediately increase their confidence in the category.
IDC analysts expect global foldable smartphone sales to rise 19% if Apple launches its foldable iPhone in 2026, with the company potentially capturing about 24% of the global market.
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