Apple price hikes may not matter because of lock-in, financing, inelastic demand: MS

Seeking Alpha ·

Apple ( AAPL ) raised prices on many of its products on Thursday, including its iPads and Mac computers, between 15% and 25%. And while some have expressed concern about the impacts on demand, Morgan Stanley believes Apple is well positioned.

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Apple (AAPL) raised prices of core products such as iPad and Mac by 15%–25%. Morgan Stanley judges that high customer lock-in (ecosystem dependence), wider adoption of device installment/financing, and the inelasticity of product demand mean the price increases are unlikely to trigger a demand shock. As a result, higher ASPs and margin improvement are expected, which could be a positive signal for AAPL's profitability and share price. However, in price-sensitive segments like education, public sector, and emerging markets, purchase delays and substitution toward lower-cost alternatives may occur, weighing on related retail and accessories sectors.

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