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Wall Street pleased by high-profit pricing of Apple's new Retina iPad mini, iPad Air

post #1 of 47
Thread Starter 
Apple's pricing strategy with the iPad Air and new iPad mini with Retina display should help the company's gross margins, analysts believe, while free software offered with new iOS and Mac device purchases should help drive upgrades and further tie users into the company's ecosystem.

iPad


After Apple announced its new iPad lineup and other products on Tuesday, Wall Street analysts offered their take on the company's fall 2013 product lineup. Included here is a roundup of their opinions.

Cowen and Company



Analyst Timothy Acuri said the higher $399 starting price for the new iPad mini with Retina display should help drive Apple's margins higher.

He believes the fact that the device is $70 more expensive than last year's model, and that it will launch later in November, are signs that Apple does in fact face yield issues with the 7.9-inch Retina display -- something that was rumored before the product was announced on Tuesday.

Acuri also appreciated Apple's free software offerings for its users, including OS X Mavericks to all, and iLife and iWork suites to recent iOS and Mac device buyers. He believes the higher residual value offered by Apple should help fuel upgrades to new devices.

iPad


Deutsche Bank



With the new Retina iPad mini starting at $399, Apple chose margins over volume, analyst Chris Whitmore believes. But he's OK with that, has he believes Apple may have priced the original iPad mini too aggressively at $329, negatively affecting the company's margins.Analysts believe the $399 Retina iPad mini will be a healthy shot in the arm for Apple's margins, helping keep them in the high 30% range.

Whitmore also has high hopes for the iPad Air, which starts at $499. He expects the significant improvements to portability and new performance enhancements will be appealing to customers.

And software has increasingly become a point of differentiation for Apple from its competitors, he said. In addition to supporting the company's free software strategy, he also noted that the interoperability and consistency of feel between OS X and iOS is a boon for customers in the Apple ecosystem.

Piper Jaffray



Between the pricing of the iPhone 5c and now the Retina iPad mini, analyst Gene Munster believes Apple's current strategy is to hold its ground on pricing mobile devices. He expects Apple will see overall gross margins of 36.7 percent in calendar year 2014.

With the iPhone and iPad representing 75 percent of Apple's sales, he expects near-term gross margin to be stable in the 36 to 38 percent range. He also expects that the new iPads will reaccelerate growth during the current holiday quarter.

iPad Air
Apple's new iPad Air. | Photo: Daniel Eran Dilger


Wells Fargo Securities



Analyst Maynard Um believes collaboration capabilities between iPad, iPhone and Mac could help drive the so-called "halo effect" for Apple devices, encouraging customers to buy into the ecosystem.

He said in his note to investors that pricing on the new MacBook Pro models with Retina displays is attractive, at $200 below their predecessors. And Um also expects the new Mac Pro desktop to become the industry standard for multimedia editing.

RBC Capital Markets



For analyst Amit Daryanani, the biggest surprise from Apple this week was pricing of its new devices. The new Retina MacBook Pro models saw a $200 price cut, while OS X Mavericks and the iWork and iLife suites are now offered for free.Wall Street watchers expect Apple's new free software, including Mavericks, iWork and iLife, will tie users into Apple's ecosystem.

As for the new iPads, Daryanani expects the iPad mini with Retina display to drive a "significant upgrade cycle" for Apple. He also noted that the new iPads will be available in multiple countries at launch, including China for the first time, which should help initial uptake.

Needham & Co.



Charlie Wolf believes Apple's new pricing was a "major surprise" announcement from the company. He sees the move stimulating demand for new iPads as well as Macs.

"But it has the potential to cause a world of hurt to competitors who still rely on software revenues to drive their earnings," he said.

iPad
Apple's new iPad Air. | Photo: Daniel Eran Dilger


J.P. Morgan



Consensus estimates for Apple's earnings are likely to trend upward in the near- to mid-term, thanks to the introduction of new iPhones and iPads that will likely be hot sellers, analyst Mark Moskowitz believes.

He also indicated that Apple has "good timing" with the new iPads, as Moskowitz lowered tablet market revenue and unit estimates for the first time ever on Sept. 3. At the time, J.P. Morgan's research suggested that the "adoption wave" in the overall tablet market could be softening.

"We think Apple's incremental features and price points could be enough to drive an Apple-related upgrade cycle in tablets," he said.

Cantor Fitzgerald



Apple's new tablet lineup is "the most significant iPad refresh since the original iPad," analyst Brian White declared. He sees the iPad Air and Retina iPad mini driving a "major upgrade cycle" for the company.

White expects that the later launch for the Retina iPad mini is likely a result of apparent yield issues with the device's high-resolution screen.

Morgan Stanley



Katy Huberty came away impressed with the broader price points offered by Apple's new iPad lineup, though she noted that the iPhone drives over 50 percent of the company's revenue and 65 percent of gross profit dollars.

She sees several potential catalysts for the company between now and the end of 2014, including the potential for cheaper iPhones that could drive market share, a new iPhone model with a larger display, and new services that could tie in to the Touch ID fingerprint sensor currently exclusive to the iPhone 5s.

iPad mini


ISI Group



Like many other members of the investment community, Brian Marshall was at Apple's iPad event, and after spending some hands-on time with the new iPads, he believes they will drive a "significant upgrade cycle" among Apple's established 170 million customer base.

He highlighted the "velocity" at which Apple is planning to launch the new iPad Air, including shipping in China on Nov. 1, calling it "impressive."
post #2 of 47
sooo... not doomed?
Doodle Dice iPhone puzzle game: A fun, free physics-laden collection of dice games.  Greatest app made yet?  Perhaps young man... Perhaps.
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Doodle Dice iPhone puzzle game: A fun, free physics-laden collection of dice games.  Greatest app made yet?  Perhaps young man... Perhaps.
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post #3 of 47

Who cares what Wall Street is pleased by?

Originally posted by Marvin

Even if [the 5.5” iPhone exists], it doesn’t deserve to.
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Originally posted by Marvin

Even if [the 5.5” iPhone exists], it doesn’t deserve to.
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post #4 of 47
How about market share ?? Don't they fear higher price will affect apple getting market share ?
post #5 of 47
I always find it ironic Wall Street only cares about margins and nothing about products AND that crazy investors actually listen to these maniacs. Apple's success will come from people buying their products not from what Wall Street has to say. Maybe one of these days we can get rid of these money changers sweeping them out of the "temple" (again).
post #6 of 47
These analysts are simply hooey. Whatever they say, simply ignore. Certainly don't go to their website since all they seek is eyeballs.
post #7 of 47

**** wall st. bunch of crooks.

Citing unnamed sources with limited but direct knowledge of the rumoured device - Comedy Insider (Feb 2014)
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Citing unnamed sources with limited but direct knowledge of the rumoured device - Comedy Insider (Feb 2014)
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post #8 of 47

Apple never cares to please those gang of evils - WallStreet. Why should someone please them at all? Nonsense.

post #9 of 47
99% here saying hello
post #10 of 47
Quote:
Originally Posted by crazy_mac_lover View Post

How about market share ?? Don't they fear higher price will affect apple getting market share ?

 

Apple does not care about cheapskates.

 

$299 for a tablet is a fair price.  The resale for the iPadMini is $170.  If you net out resale value the iPadMini's are cheaper than the smaller and slower Nexus7, Galaxy-whatever

post #11 of 47
What about market share, Wall Street? Make your damn mind up.
post #12 of 47
This Is obviously just an opinion. But.

Many of these analysts have been slamming Apple.

They are afraid of looking like fools when Apple announces record sales and profit shortly.

Hence the praise.
post #13 of 47

Yes, well, so long as the plantation owners are pleased. 

post #14 of 47

The article below cites 10 analysts with their Apple stock price projections based on the new products. Their projections range from $525 to $777. The stock right now is at $520. That is an INCREDIBLE range for these people all in the same field (i.e., no consistency in this field). It's almost like forecasting the weather...

 

http://tech.fortune.cnn.com/2013/10/23/apple-ipad-mavericks-analysts/?source=yahoo_quote

post #15 of 47
I see the media meme this morning is "the software might be free but boy will you pay a pretty penny for the hardware!" OK can some one show me where Apple raised the price of their hardware to cover making the software free? Or where Apple didn't reduce prices or didn't reduce them as much as expected to cover this free software? They didn't raise prices on iPhones. Heck my iPhone 5 running iOS 7 got the iWork and iLife apps for free. CNBC and others are trying to imply something that doesn't exist. Apple has always made money off hardware sales and all they're doing now is making it more attractive to own Apple hardware. Basically Apple is negating Microsoft's supposed advantage with Office. For the casual user Apple's productivity apps are good enough and being free makes them even better.

I rewatched the keynote and one thing I noticed is Apple doubled down on their anti convergence stance. They focused on how incredibly light and mobile the iPad Air is. All the shots were of people out and about using it; showing it off as something you can take with you wherever you go. Compare that to the Surface which is 99% of the time shown with the kickstand out and keyboard attached. Plus it looks incredibly bulky compared to the Air, and weighs more too. I look at the iPad Air and see it as Apple realizing their vision of getting the hardware out of the way and allowing it to be all about software and content. It's all about refining the hardware to a point where it almost disappears. That's the complete opposite of Microsoft's strategy.
post #16 of 47
Assumptions assumptions, they seem to think the higher price is only there to drive margins, has anyone on wall street stopped to think about the possibility that some components cost more? A retina screen could be $50 more and the A7 could easily be $10 more, throw in a few bucks for the M7 and you cover much of the Minis cost increase. On top of that there is a cost associated with free software no matter how trivial.

In the end we can't really say that margins will be higher. At least not on the base model. We do know that the uprated models with more flash ought to be doing much better as there has been a real decrease in hardware costs for flash.
post #17 of 47

To me it seems like Apple would better benefit from a lower price and increasing their overall sale numbers. They could then just make for up lower cost in their 30% cut of every app sold and every in-app purchase.

post #18 of 47
Quote:
Originally Posted by joshuarayer View Post

To me it seems like Apple would better benefit from a lower price and increasing their overall sale numbers. They could then just make for up lower cost in their 30% cut of every app sold and every in-app purchase.

Josh, Apple is a hardware company. Software drives hardware sales and is effectively a loss leader. The people who appreciate Apple products will pay to get them. The people who can't afford them but what they can and aren't going to be buying extra software. They'll pick up free software which Apple makes no money on. Wall Street can't get a grasp on this because they don't and never will understand Apple.
post #19 of 47
Quote:
Originally Posted by wizard69 View Post

Assumptions assumptions, they seem to think the higher price is only there to drive margins, has anyone on wall street stopped to think...

Haha. The answer is no.
post #20 of 47
Wow, this is the first time is a while that AAPL hasn't lost 10% in the days after a major announcement (of course it always recovers, like after the recent iPhone announcement). It tried yesterday (was briefly down a couple buck during the keynote), but the hits just kept coming yesterday.

My only disappointments were lack of TouchID, which I suspect is a supply issue, and mostly the lack of a new cinema display (which would be low volume, but still). Seriously, who's going to spend $5K on a (reasonably spec'ed) Mac Pro, and hook it up to a 4 year old monitor design.

Given all the great updates yesterday, though, I was surprised at both how bored Tim/Phil/Craig were (they didn't seem enthused or even prepared), and the audience too. What does it take to get some applause from that crowd!

There seems to be no real appreciation for the iWorks updates (both native and iCloud version), but those are amazing! The new iWorks (on Mac, iOS and iCloud) makes google docs look like WordStar. But I digress.
post #21 of 47
Quote:
Originally Posted by joshuarayer View Post

To me it seems like Apple would better benefit from a lower price and increasing their overall sale numbers. They could then just make for up lower cost in their 30% cut of every app sold and every in-app purchase.
Sorry I don't think Apple's iTunes business makes them a lot of money. Maybe the Mac AppStore does but my guess is iOS and iTunes music is pretty much break even. At least it used to be.
post #22 of 47
Quote:
Originally Posted by Rogifan View Post

Sorry I don't think Apple's iTunes business makes them a lot of money. Maybe the Mac AppStore does but my guess is iOS and iTunes music is pretty much break even. At least it used to be.

Hasn't been break-even for some time apparently. Note that as of this year Apple does break out iTunes/software into it's own revenue category now. Best guesses put the net profits in the 2Billion+ range for 2012.
melior diabolus quem scies
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melior diabolus quem scies
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post #23 of 47
Quote:
Originally Posted by Gatorguy View Post

Hasn't been break-even for some time apparently. Note that as of this year Apple does break out iTunes/software into it's own revenue category now. Best guesses put the net profits in the 2Billion+ range for 2012.
But doesn't that include Mac software? I'd be curious to know what Apple's profit is on core iTunes (movies, music, books) and iOS App Store. I'm still skeptical about this idea that Apple could cut prices on hardware and make it up elsewhere. When has distributing other people's content been a profitable business? How much profit is Amazon making off Prime subscriptions?
post #24 of 47

As others have rolled their eyes, “Wait just a damn minute, Wall Street!” I thought you said market share is the be-all end-all of success. Now you’re saying Apple’s margins make you happy? Which is it, you supreme assholes?

post #25 of 47
Quote:
Originally Posted by Ireland View Post
 

**** wall st. bunch of crooks.

*thumbs up.  Spot on. 

 

Lemon Bon Bon.

You know, for a company that specializes in the video-graphics market, you'd think that they would offer top-of-the-line GPUs...

 

WITH THE NEW MAC PRO THEY FINALLY DID!  (But you bend over for it.)

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You know, for a company that specializes in the video-graphics market, you'd think that they would offer top-of-the-line GPUs...

 

WITH THE NEW MAC PRO THEY FINALLY DID!  (But you bend over for it.)

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post #26 of 47

If Wall Street is happy that makes me happy. I agree the analysts are idiots with their own agenda but as an AAPL investor I have no problem at all with them driving the price back up to where it should be. Speaking of douche analysts this bald guy from Yahoo hates Apple. In every single video he ALWAYS has something negative to say. What makes it worse it it is clear he has absolutely no technical understanding of why things like the A7 are such a big deal.

 

http://finance.yahoo.com/blogs/breakout/suddenly-microsoft-not-google-apple-hates-132745760.html

 

Never argue with an idiot. They will only bring you down to their level and beat you with experience. 

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Never argue with an idiot. They will only bring you down to their level and beat you with experience. 

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post #27 of 47
Quote:
Originally Posted by joshuarayer View Post
 

To me it seems like Apple would better benefit from a lower price and increasing their overall sale numbers. They could then just make for up lower cost in their 30% cut of every app sold and every in-app purchase.

 

"If" Apple was to find a magic number for decreasing margin but at the same time increasing share to the point where the eps rose... then Apple wouldn't have to worry about making up any amount.

 

Finding that magic number is the trick.

 

Right now... margins... the devil you know.

na na na na na...
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na na na na na...
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post #28 of 47
Why don't they just say, "the stage is set for take off"
post #29 of 47

If we get past earnings without harm - I think $575-$600 is doable.

post #30 of 47
I am impressed with those anal ists .
post #31 of 47
Quote:
Originally Posted by joshuarayer View Post
 

To me it seems like Apple would better benefit from a lower price and increasing their overall sale numbers. They could then just make for up lower cost in their 30% cut of every app sold and every in-app purchase.

 

Considering how often it's reported that Apple have yield issues and trouble in the supply chain, selling more for less would seem like a very risky choice.  Apple run a pretty slick shop by more accounts, but throwing a requirement for hundred of millions more units at them would be a strain on even their formidable resources.

 

That Steve Jobs quote about old Apple's problem of chasing profits over market share gets dragged out every now and then, but it doesn't really apply.  Apple have a very healthy market share, and pushing it even further might be an overstretch.

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post #32 of 47
Quote:
Originally Posted by fuji321 View Post
 

If we get past earnings without harm - I think $575-$600 is doable.

 

I think $640 is where Apple should be if you actually look at the numbers and understand the market. But that will take some time, around 6 months to a year to get back to that level. there will be resistance around the $560 mark. 

 

Apple has really only been competing in certain markets and countries. Now they have added T-Mobile, DoCoMo, China Mobile, and many other carriers around the world. That alone will mean very decent growth. Samsung was already in all of these countries and carriers so they really can't grow much more than they already have. 

 

Never argue with an idiot. They will only bring you down to their level and beat you with experience. 

Reply

 

Never argue with an idiot. They will only bring you down to their level and beat you with experience. 

Reply
post #33 of 47
Quote:
Originally Posted by Rogifan View Post

I see the media meme this morning is "the software might be free but boy will you pay a pretty penny for the hardware!"

Yes, that's actually the bigger story than the hardware launches.  I would think this shift to free OSX/iWork/iLife upgrades will result in a small hit to earnings this quarter, the only thing that will prop it up is increased units sold (hardware).  However, I'm sure most analysts see this as an intelligent long term decision.  Shoring up the ecosystem will increase units sold and retention.  And let's not forget that revenue is not only from hardware but also from iTunes and Apps (now AND in the future).  I see iTunes and Apps as a growing revenue stream that will (by itself) make up for the free OSX/iWork/iLife upgrades and then some.  There will be a day when majority will shed cable and move to subscription or PAYG media consumption via Apple servers.

post #34 of 47
Originally Posted by AppleInsider View Post
"But it has the potential to cause a world of hurt to competitors who still rely on software revenues to drive their earnings," he said.

 

Microsoft is now facing pricing pressure from Apple as well as Google, and not just in mobile any more.

Will be interesting to see how Microsoft prices legacy Windows 9.

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post #35 of 47
Originally Posted by drewys808 View Post
 

... I see iTunes and Apps as a growing revenue stream that will (by itself) make up for the free OSX/iWork/iLife upgrades and then some.  There will be a day when majority will shed cable and move to subscription or PAYG media consumption via Apple servers.

 

Bingo.  This is what Apple's future television strategy will probably be.  There may or may not ever be an "Apple branded television set."  But there absolutely has to be some kind of un-bundled Apple-delivered television streaming solution.  Apple will eventually need to shift its business model to be far more content- and services-oriented.

 

I think TV content and services will eventually be their major revenue stream outside hardware.  The server + OS + terminal hardware + app infrastructure is already there.  iTunes Festival is a sneak peek: live streaming plus pre-recorded on-demand viewing on any Apple device, from 4" iPhone to your 50"+ living room TV screen.  It's a massively successful and extremely popular proof-of-concept.

 

"Content is king.  Distribution is King Kong."

- Old Hollywood Saying


Edited by SockRolid - 10/23/13 at 11:24am

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post #36 of 47
Quote:
Originally Posted by jungmark View Post

What about market share, Wall Street? Make your damn mind up.

That's on every other day of the week. They change daily.
Enjoying the new Mac Pro ... it's smokin'
Been using Apple since Apple ][ - Long on AAPL so biased
nMac Pro 6 Core, MacBookPro i7, MacBookPro i5, iPhones 5 and 5s, iPad Air, 2013 Mac mini.
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Enjoying the new Mac Pro ... it's smokin'
Been using Apple since Apple ][ - Long on AAPL so biased
nMac Pro 6 Core, MacBookPro i7, MacBookPro i5, iPhones 5 and 5s, iPad Air, 2013 Mac mini.
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post #37 of 47
Quote:
Originally Posted by SockRolid View Post

Microsoft is now facing pricing pressure from Apple as well as Google, and not just in mobile any more.
Will be interesting to see how Microsoft prices legacy Windows 9.

MS should start supplying all their software for free too now. They'd last a few years on what Ballmer hasn't pissed away I'd think. 1biggrin.gif
Enjoying the new Mac Pro ... it's smokin'
Been using Apple since Apple ][ - Long on AAPL so biased
nMac Pro 6 Core, MacBookPro i7, MacBookPro i5, iPhones 5 and 5s, iPad Air, 2013 Mac mini.
Reply
Enjoying the new Mac Pro ... it's smokin'
Been using Apple since Apple ][ - Long on AAPL so biased
nMac Pro 6 Core, MacBookPro i7, MacBookPro i5, iPhones 5 and 5s, iPad Air, 2013 Mac mini.
Reply
post #38 of 47
Quote:
Originally Posted by MattBookAir View Post

Wow, this is the first time is a while that AAPL hasn't lost 10% in the days after a major announcement (of course it always recovers, like after the recent iPhone announcement). It tried yesterday (was briefly down a couple buck during the keynote), but the hits just kept coming yesterday.

My only disappointments were lack of TouchID, which I suspect is a supply issue, and mostly the lack of a new cinema display (which would be low volume, but still). Seriously, who's going to spend $5K on a (reasonably spec'ed) Mac Pro, and hook it up to a 4 year old monitor design.

Given all the great updates yesterday, though, I was surprised at both how bored Tim/Phil/Craig were (they didn't seem enthused or even prepared), and the audience too. What does it take to get some applause from that crowd!

There seems to be no real appreciation for the iWorks updates (both native and iCloud version), but those are amazing! The new iWorks (on Mac, iOS and iCloud) makes google docs look like WordStar. But I digress.

They have until orderability for the Mac Po is turned on sometime around December to get a 4K display done. 1wink.gif
post #39 of 47
Quote:
Originally Posted by drewys808 View Post

I would think this shift to free OSX/iWork/iLife upgrades will result in a small hit to earnings this quarter, the only thing that will prop it up is increased units sold (hardware). 

It'll be a very small hit to the financials.
post #40 of 47
Quote:
Originally Posted by digitalclips View Post

That's on every other day of the week. They change daily.

So true but at least their consensus opinions are the same: Apple is doooomed! (TM)
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