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UBS: Apple deserves benefit of doubt with iPhone 5c pricing

post #1 of 92
Thread Starter 
Assorted investment analysts who downgraded Apple stock in the wake of last week's new iPhone 5c reveal may have been a bit hasty, according to a new report out from UBS that says Cupertino may have earned the benefit of the doubt.



A number of analysts largely expected Apple to hit a lower unsubsidized price point for the polycarbonate-backed iPhone 5c, which was unveiled last week, but were disappointed when the final cost was officially announced. Many panned the decision, though Apple's choice to go premium may ultimately play out in its favor, a UBS report said on Monday.

"Apple probably deserves more credit than the view it is asleep at the wheel," reads the report from UBS, which retains a neutral 12-month rating on AAPL. "Successful companies historically have consistently chosen better over cheaper, for which Apple is the poster company."

UBS was actually among those firms that cut their AAPL ratings to neutral following the unveiling of the iPhone 5c.

ubs-chart-130916.jpg


UBS attributes its own downgrade to three factors. First, the firm was "concerned that Apple might be disrupted." It was also "worried that investors are worried Apple might be disrupted." Finally, there were concerns that, even if correct, Apple's strategy may not play out for some time.

The new report posits that Apple's management may well be aiming for the growing global middle class with the iPhone 5c instead of the much lower-end markets some were expecting. A $400 price point, analysts believed, would help Apple address a significant portion of the fastest growing smartphone consumer segment. Instead, Apple announced the 5c at a $549 price point, more than a third more costly than some investors had hoped.

UBS sets a 12-month price target for AAPL at $520, noting that it is still "right on its 200-day moving average with the 50-day having just moved above the 200-day MA (a bullish golden cross.)" The firm predicts a price-to-earnings ratio of 11.5, or $45.46 per share for fiscal 2014.
post #2 of 92

Damn analysts!! Always coming out with negative views about Apple!! Oh... wait...

Hmmmmmm...
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Hmmmmmm...
Reply
post #3 of 92
Wait, they are saying a company with a proven track record has a better idea about their business than an analyst?

I don't believe them.

/s
post #4 of 92
Quote:
Originally Posted by island hermit View Post

Damn analysts!! Always coming out with negative views about Apple!! Oh... wait...

They did downgrade AAPL.
post #5 of 92
The bad analysts, the good analysts.
Who cares ? - as long as I can get hold of a 64bit Bling iPhone Friday.
 
Where's the new Apple TV?
 
 
(So Y is the new X?   Zzzzzzzzzz......)
Reply
 
Where's the new Apple TV?
 
 
(So Y is the new X?   Zzzzzzzzzz......)
Reply
post #6 of 92
AAPL doesn't deserve the benefit of any doubt. If they were trying to match the bodily functions of death the company couldn't have picked 4 fuglier colors! Any magic this company had is gone and as a Apple early adopter and investor I couldn't be more disgusted with management. We have the worst of Jerry Yang and Steve Balmer in Tim Cook, a guy who couldn't get it right if his life depended on it. Based on its new products I can confidently say APPLE SUCKS!
post #7 of 92
Quote:
Originally Posted by MJ Web View Post

Based on its new products I can confidently say APPLE SUCKS!

No, no.

Just your perception does.
Android: pitting every phone company in the world against one, getting a higher number, and considering it a major achievement.
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Android: pitting every phone company in the world against one, getting a higher number, and considering it a major achievement.
Reply
post #8 of 92
Quote:
Originally Posted by MJ Web View Post

AAPL doesn't deserve the benefit of any doubt. If they were trying to match the bodily functions of death the company couldn't have picked 4 fuglier colors! Any magic this company had is gone and as a Apple early adopter and investor I couldn't be more disgusted with management. We have the worst of Jerry Yang and Steve Balmer in Tim Cook, a guy who couldn't get it right if his life depended on it. Based on its new products I can confidently say APPLE SUCKS!
Lol! Sarcasm? Wait till this time next year - either you are correct, or TC and co have adopted a new strategy for R&D secrecy - purposely letting bits leak to distract from what's pertinent (what I'm saying is that they may indeed have revolutionary product categories in the wings, and everyone doubts because we are back to the typical level of Apple secrecy - except that now the media's reaction is, "No news from Cupertino?! OMG, Apple is DOOMED!" - only difference is that in the past no one was EXPECTING to be blown away)
post #9 of 92
Amusing language... "We should PROBABLY give Apple the benefit of the doubt". These people are so up their own cavities.

I happen to really like the iPhone 5C. Its cute and rugged at the same time. It's probably not made for people who stand in line for 2 weeks, so I can imagine the numbers aren't quite as staggering as last year.
post #10 of 92

Would like to think UBS analysts are just using common sense here but somehow I just wonder if their traders were long Apple stock for a tad bit too long and now are looking for a way out.

post #11 of 92
Quote:
Originally Posted by MJ Web View Post

AAPL doesn't deserve the benefit of any doubt. If they were trying to match the bodily functions of death the company couldn't have picked 4 fuglier colors! Any magic this company had is gone and as a Apple early adopter and investor I couldn't be more disgusted with management. We have the worst of Jerry Yang and Steve Balmer in Tim Cook, a guy who couldn't get it right if his life depended on it. Based on its new products I can confidently say APPLE SUCKS!
Wow, someone woke up on the wrong side of the bed this morning...

I guess it's people like you who've been dumping and shorting AAPL this morning?

People with such unimaginable ignorance and short-sightedness should be BANNED from ever being able to trade any stocks!
post #12 of 92
Quote:
Originally Posted by jungmark View Post


They did downgrade AAPL.

 

To neutral with a $520 price target over 12 months.

 
Hell... I'll be glad to make 15.6% on any investment in a year (based on today's price).
Hmmmmmm...
Reply
Hmmmmmm...
Reply
post #13 of 92
Right now China is the REAL target. Right now it's 1984 in China. Not in the Orwellian sense. China is obsessed with status, style, and impressions. The flashier and more costly something is the more desirable it is. America was this way in the 80s (and still is to a certain extent). The Chinese are obsessed with showing off what they got. Trust me. The colorful iPhones (in a palette, by the way, very appealing to the fashion conscious Chinese) with a still premium price will sell very well where it counts. Anyone discounting Apple for this strategy needs to open their eyes to the new world around them and realize that life isn't lived in one's own backyard.

Tim Cook is brilliant.
The new iPhones are spot on for what the market needs.
I think this will all work and work very well.
post #14 of 92
Consumers still love Apple as evidenced by the always crowed Apple stores (& always empty Microsoft copycat stores). So, don't blame Tim Cook for Wall Street's tantrum because TC did not listen to them. Apple has chosen quality over quantity. If you don't like it, buy the Hyundai over the Mercedes and STFU.
post #15 of 92

Jean-Louis Gassée has a nice piece in the Guardian: 'iPhone 5C: why the naysayers are wrong to say Apple is in trouble' http://bit.ly/17EsVx2.

post #16 of 92
There's no reason to downgrade Apple's stock. This colorful little thingie is just an iPhone 5 in plastic. didn't cost Apple that much to design. It's also priced high enough, those who decide not to get it will probably buy the 5s instead. Those who can't afford the 5s aren't likely to be looking seriously at the 5c. On a contract, the difference is about a dime to a quarter a day over those two years.

I know that, were I in the market for a spanking new iPhone--my 3GS is getting a bit quirky --I'd do without a luxury or two and get the vastly better 5c. That greater cost will come back on resale.

For a parallel, imagine there's a Ford/BMW dealer offering BMW 1 Series Convertible in silver or grey for $36,000 and a Ford Focus in various "Hello Kitty" pastels for $32,000. Which would you get?
post #17 of 92

I had no doubt doubt that the pricing of iPhone 5C was a bad decision, why should Apple have any benefit from this?

post #18 of 92
Quote:
Originally Posted by Enigmamatic View Post

Right now China is the REAL target. 

Right, China is the real target because the rest of the world is already fed up with AAPL! Asia is Apple's last gasp and only hope to not entirely go down the crapper. Samsung and Google have eaten AAPl's lunch -- past tense, game over! With Steve gone Apple has become a pathetic joke unable to protect its core IP and brand. 

 

AAPL > $447 and free falling............................

post #19 of 92
What is really interesting, for the first time, is that Apple is starting a new phase of upgrade cycles in their user base... The size of that base has exploded over the past four years...

It is well understood that few iPhone owners ever switch to Android - they are very loyal users... And yet, if your iPhone is less than a couple years old, it doesn't make much sense to upgrade...

However, the iPhone 4 is now 3 1/2 years old, and the 4S is two years old... There are massive number of iPhone owners with those two phones who are very likely pay $99 or $199 to renew their agreements and upgrade to the latest phone... (The same thing happens from time to time in the automotive industry, when the average age of the vehicle on the road drifts too high - people have to replace their car at some point...)

That installed base simply didn't exist at its current scale when the 4S (and even the 5) was introduced...

My guess is that the October-December quarter will be a big one for Apple, due to this NEW upgrade cycle, the DoCoMo deal and immediate availability in China... For this reason, although the opening week numbers may not show it, the first quarter's numbers (including the holiday season) should absolutely blow away what the 4S and 5 did...

At $450 per share, with the dividends and buybacks, looks like a nice value...
post #20 of 92
Quote:
Originally Posted by Inkling View Post

There's no reason to downgrade Apple's stock. This colorful little thingie is just an iPhone 5 in plastic. didn't cost Apple that much to design. It's also priced high enough, those who decide not to get it will probably buy the 5s instead. Those who can't afford the 5s aren't likely to be looking seriously at the 5c. On a contract, the difference is about a dime to a quarter a day over those two years.

I know that, were I in the market for a spanking new iPhone--my 3GS is getting a bit quirky --I'd do without a luxury or two and get the vastly better 5c. That greater cost will come back on resale.

For a parallel, imagine there's a Ford/BMW dealer offering BMW 1 Series Convertible in silver or grey for $36,000 and a Ford Focus in various "Hello Kitty" pastels for $32,000. Which would you get?
The issue isn't about on contract. The issue is a lot of people are trying to get out of contracts and outside of the US the subsidy model isn't as prevalent. $550 is expensive. Especially if this "colorful little thingie" didn't cost Apple that much to design.
post #21 of 92

dont listen to these idiots they know just about as much as we know they are guessing.bank america puts a down grade on apple they should be down graded themselfs the stock is at 13 for a reason

post #22 of 92

buy apple on dips scale in 10 shares at at time i started at 470.465.449.and dont listen to these idiots be a long time holder

post #23 of 92
how can the analysis comment on Apple strategy which in fact Apple never says what their strategy actually is. Hell these analysis are still try to figure out what the who Itune strategy was form 10 yrs ago and how entire product ecosystem play outs in their favor.
post #24 of 92

i think they are getting themselfs sold out and they will come around and start buying apple pe of 11

post #25 of 92
Quote:
Originally Posted by AppleInsider View Post

Assorted investment analysts who downgraded Apple stock in the wake of last week's new iPhone 5c reveal may have been a bit hasty, according to a new report out from UBS that says Cupertino may have earned the benefit of the doubt.

 

Um, ya' think?

post #26 of 92

Pricing (supply/demand) and production capacity are tightly linked...

 

Remember the original iPhone, way back in 2007, was priced at $599 with 8GB and a contract (AT&T only)?

 

Today, the 16GB 5c is $99 with a contract, take your pick...  The horror...the horror!

 

Apple priced the original that high, in part, because they didn't have the production capacity and they wanted to capture the premium buyer first...  They've done this, oh, about fifty times over the years with their various products...  iPhones, iPads, iPods, Macs, etc.

 

Apple, of course, could have priced the 5C as 'free' with contract, and/or, let's say, $399 off-contract, but there would be massive global buying, short supply, long deliveries and unhappy customers...  Better for Apple to get the premium buyers first, keep their customers happy, continue to ramp their production capacity and capture the discount buyers down the road...

post #27 of 92
Quote:
Originally Posted by Rogifan View Post


The issue isn't about on contract. The issue is a lot of people are trying to get out of contracts and outside of the US the subsidy model isn't as prevalent. $550 is expensive. Especially if this "colorful little thingie" didn't cost Apple that much to design.

 

There are people getting rich everyday in China and a lot of people new to a middle-class lifestyle. Apple products are for those people, not the Android masses.

Proud AAPL stock owner.

 

GOA

Reply

Proud AAPL stock owner.

 

GOA

Reply
post #28 of 92

"UBS attributes its own downgrade to three factors. First, the firm was "concerned that Apple might be disrupted." It was also "worried that investors are worried Apple might be disrupted." Finally, there were concerns that, even if correct, Apple's strategy may not play out for some time."

 

What kind of stupid logic is that?!!!

 

These idiots are same idiots who brought down the economy worldwide not too long ago!

....the lack of properly optimized apps is one of the reasons "why the experience on Android tablets is so crappy".

Tim Cook ~ The Wall Street Journal - February 7, 2014

Inside Google! 

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....the lack of properly optimized apps is one of the reasons "why the experience on Android tablets is so crappy".

Tim Cook ~ The Wall Street Journal - February 7, 2014

Inside Google! 

Reply
post #29 of 92
Quote:
Originally Posted by jungmark View Post


They did downgrade AAPL.

 

Yeah, but they were right to do so, especially since they were apparently among the first to do so. They aren't trying to predict the company's inherent worth (for lack of a better term), they are trying to predict what the stock will do, which may or may not be closely tied to the company's inherent worth. If you look at their stated reasons, they make sense, too. 

 
Yes, Apple deserves the benefit of the doubt on this, given the fact that people always complain about Apple products being too expensive, then the company typically goes on to sell as many as they can make. And yes, Apple stock went down more than 10% since the new phone announcements and their downgrade, so they were right about that too. It doesn't mean that the company's valuation is reasonable when compared to its so-called peer group.
post #30 of 92
Quote:
Originally Posted by Ken_sanders_aia View Post

Pricing (supply/demand) and production capacity are tightly linked...

Remember the original iPhone, way back in 2007, was priced at $599 with 8GB and a contract (AT&T only)?

Today, the 16GB 5c is $99 with a contract, take your pick...  The horror...the horror!

Apple priced the original that high, in part, because they didn't have the production capacity and they wanted to capture the premium buyer first...  They've done this, oh, about fifty times over the years with their various products...  iPhones, iPads, iPods, Macs, etc.

Apple, of course, could have priced the 5C as 'free' with contract, and/or, let's say, $399 off-contract, but there would be massive global buying, short supply, long deliveries and unhappy customers...  Better for Apple to get the premium buyers first, keep their customers happy, continue to ramp their production capacity and capture the discount buyers down the road...

Indeed, before the launch of the 5c, I was thinking that Apple could have hard time to meet the demand for a brand new 450$ iPhone... : )
post #31 of 92
Quote:
Originally Posted by MJ Web View Post

AAPL doesn't deserve the benefit of any doubt. If they were trying to match the bodily functions of death the company couldn't have picked 4 fuglier colors! Any magic this company had is gone and as a Apple early adopter and investor I couldn't be more disgusted with management. We have the worst of Jerry Yang and Steve Balmer in Tim Cook, a guy who couldn't get it right if his life depended on it. Based on its new products I can confidently say APPLE SUCKS!

 

My daughter loves the blue and yellow iphone 5c and the green one too.  Ugly is in the eye of the beholder.  I think the GS4 is one of the ugliest mobile phones built today but hey that is just me.

post #32 of 92
Quote:
Originally Posted by SpamSandwich View Post

There are people getting rich everyday in China and a lot of people new to a middle-class lifestyle. Apple products are for those people, not the Android masses.
So $550 isn't expensive for the middle class? I'm not saying Apple needs to get into a race to the bottom but there is something in between the high end and the low end, no?
post #33 of 92
Quote:
Originally Posted by Ken_sanders_aia View Post

Pricing (supply/demand) and production capacity are tightly linked...

Remember the original iPhone, way back in 2007, was priced at $599 with 8GB and a contract (AT&T only)?

Today, the 16GB 5c is $99 with a contract, take your pick...  The horror...the horror!

Apple priced the original that high, in part, because they didn't have the production capacity and they wanted to capture the premium buyer first...  They've done this, oh, about fifty times over the years with their various products...  iPhones, iPads, iPods, Macs, etc.

Apple, of course, could have priced the 5C as 'free' with contract, and/or, let's say, $399 off-contract, but there would be massive global buying, short supply, long deliveries and unhappy customers...  Better for Apple to get the premium buyers first, keep their customers happy, continue to ramp their production capacity and capture the discount buyers down the road...
So we're supposed to believe Apple priced the 5C at $550 because if they priced it any lower they wouldn't have been able to make them fast enough? I guess then I'd tell people who aren't desperate to wait a few months when it comes down in price.
post #34 of 92
Quote:
Originally Posted by Enigmamatic View Post

Right now China is the REAL target. Right now it's 1984 in China. Not in the Orwellian sense. China is obsessed with status, style, and impressions. The flashier and more costly something is the more desirable it is. America was this way in the 80s (and still is to a certain extent). The Chinese are obsessed with showing off what they got. Trust me. The colorful iPhones (in a palette, by the way, very appealing to the fashion conscious Chinese) with a still premium price will sell very well where it counts. Anyone discounting Apple for this strategy needs to open their eyes to the new world around them and realize that life isn't lived in one's own backyard.

Tim Cook is brilliant.
The new iPhones are spot on for what the market needs.
I think this will all work and work very well.

 

In order to break through in China Apple would have had to priced this mid tier. Remember that in China the product is going to cost more and that there is no option to put the cost of the device into the contract. They have to pay for it up front. And, people tend to have less money in China than the US.

 
Will it sell in China? Yes. Will it sell well? Yes. Will it have a breakthrough? No. It will be a niche product.
post #35 of 92

The initial 5C pricing is about getting the premium pricing first from people who are willing to pay it, and balancing supply and demand...  Again, this is not a new strategy, this is something Apple has done for years, starting with the original iPhone in 2007...

 

Now, one might make the argument that the strategy doesn't work anymore, in a world flooded with cheap Android knock-offs, but I actually think Apple is smart to preserve their premium brand and unparalled customer loyalty...  Their US market share is now rising, compared to Android - once in the Apple ecosystem, people tend to stick around - and the 5C, while not satisfying the price point expectations of everyone, should help Apple grow more share overseas as well...

 

It's interesting - there are quite a few Android phones out there, including from Samsung,  priced at $249 or higher under contract, with some bigger screens for sure, but I don't hear people screaming about the doomed strategy of those products or vendors...  (Apple bashing is just more fun, apparently...)  Every vendor targets a market that is important to them...  Apple continues to target the middle-to-high-end: the premium buyer...  Given the app and media revenue they get off of each phone purchase - compared to Android, they continue to get the absolute lion's share of $$ in that regard, despite their smaller volume - that strategy seems to make sense...  The initial phone purchase is just one piece of the revenue stream...

 

Android is certainly dominating in unit volume, but it is clearly suffering in terms of profits for its OEMs (other than Samsung), which challenges the sustainability of its licensing model...  Windows never had that problem, until recently...  Android also continues to suffer from serious fragmentation - by the end of the year, more people will be running iOS 7 by about a factor of 100 than will be running KitKat, or even Jelly Bean...  Developers must write for different versions of Android, different screen resolutions, different graphics APIs, etc., etc....  Total pain in the neck...  Again, the free-licensing and do-your-own-thing approach was great for firing up low-cost volume overseas, but is not sustainable in the long-term...

 

With their Motorola acquisition, Google started to bend toward Apple's integrated model, and they will continue to do so, but they are a couple of years behind (not to mention their confusing Chrome OS/Android schizophrenia - at least iOS and MacOS are built on the same core)...  And Google has unintentionally helped midwife dozens of competitors who will continue to beat them up on the low-end: as a condition of their Motorola acquisition, they are required by the Feds to continue to give away Android for free for another three years...  Apple is happy to let them do that while continuing to dominate the high-end...

post #36 of 92
Apple has more to gain from a more expensive phone than it does on a cheaper one. It makes hardware that gets people to pay for software. How much do the people who can barely afford a computer spend on software for it? Apple would just have a low end of jailbreak using customers. Hardly worth it. How many low end users would have an active credit card attached to their account? As usual Apple will make more money than everyone else because it knows how to make money. By saying no to everyone who wants an iPhone and yes to only those who can afford an iPhone and would buy software and official peripherals for it. The analysts are in the same camp as those who can't buy a new device every two years and want the device they can get to do everything possible so they can get themostbang for the buck. The analysts are not interested in building solid foundations for business only building hollow empires they can puff up, squeeze dry, and destroy. Apple isn't playing their game.
post #37 of 92
Or...you can wait until Apple does announce numbers. You know: real data? Something investors in financial markets used to make buy/sell decisions on? Before hysteria and hearsay took over? Sheesh.

"Apple should pull the plug on the iPhone."

John C. Dvorak, 2007
Reply

"Apple should pull the plug on the iPhone."

John C. Dvorak, 2007
Reply
post #38 of 92
Quote:
Originally Posted by Rogifan View Post

So $550 isn't expensive for the middle class? I'm not saying Apple needs to get into a race to the bottom but there is something in between the high end and the low end, no?

$5 for a cup of coffee isn't cheap either but no one is begging Starbucks to release a $.50 coffee option.
post #39 of 92

Until someone gets back on his/her regular meds, To The Banned User List Ye Go! (That would be for MJ Web, Esquire)

post #40 of 92
Quote:
Originally Posted by Mechanic View Post

Go away mr. 2 post troll

They will mysteriously go away when they're proven wrong. No mea culpa, no sticking around to stand corrected or take their punishment. They slink away, back to their Android holes. Only to emerge again when there's a future opportunity to spread FUD, in the gap between the start of sales and real numbers.

"Apple should pull the plug on the iPhone."

John C. Dvorak, 2007
Reply

"Apple should pull the plug on the iPhone."

John C. Dvorak, 2007
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