Shares of Apple slide, analysts cut targets in disappointment over iPhone 5c pricing

Posted:
in AAPL Investors edited March 2014
Market watchers hoping for Apple to introduce a radically cheaper iPhone model this week came away disappointed, as the company opted to maintain its smartphone pricing strategy rather than aggressively cutting margins.

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Shares of Apple were off nearly $30, or close to 6 percent, in morning trading on Wednesday as investors reacted to the announcement of the iPhone 5s and iPhone 5c. Negative sentiment surrounding the company mostly revolved around the iPhone 5c, which some market watchers hoped would be priced around $400 without a contract subsidy.

Instead, the entry-level 16-gigabyte iPhone 5c will run $549 unsubsidized in the U.S., while the same model can be had for $99 with a new two-year service contract. A high-end 32-gigabyte model will cost $649, or the same as a 16-gigabyte iPhone 5s.

Most notably, Credit Suisse, Bank of America Merrill Lynch, and UBS all cut their ratings on AAPL stock from "buy" to "neutral." Longtime Apple bear Alex Gauna of JMP Securities also maintained his "market perform" rating, saying he feels the iPhone 5c will especially be too expensive in China, which is a key emerging market.

iPhone


Though market reaction was mostly negative following Apple's iPhone unveiling, not all analysts were inclined to cut their targets. David Evanson of Canaccord Genuity actually increased his price target from $530 to $550, citing technical advantages of the iPhone 5s over Android-based competitors, including the new Touch ID fingerprint sensor, M7 motion coprocessor, and 64-bit A7 CPU.

"We believe new capabilities in iOS 7 available Sept. 18 along with the features and new colors for the 5s and 5c should drive strong sales, particularly to Apple's large iOS base, Evanson said.

Timothy Arcuri of Cowen and Company said in a note to investors Wednesday that Apple "took the high road" with this week's iPhone 5c announcement, opting for profits over market share. He has maintained his "outperform" rating for AAPL stock, saying that Wall Street estimates for 2014 look "very beatable."

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Gene Munster also maintained his "overweight" rating for AAPL, but admitted he was "wrong and disappointed" with the pricing of the iPhone 5c. Munster was also hopeful that Apple would announce a deal with China Mobile, but the iPhone is not expected to debut on the world's largest carrier until later this year.

Munster was expecting Apple to sell 50 million $300 iPhones in 2014, growing to 100 million in 2015, with 15 percent gross margin. Those projected sales have now been removed from his targets.

Amit Daryanani of RBC Capital Markets, meanwhile, showed optimism regarding the relatively high profit margins he expects Apple to achieve with the iPhone 5c. But he did admit that the $549 entry price of the iPhone 5c came in as a "slight negative," in his view, especially considering that the iPhone 4S remains as Apple's free-on-contract handset.
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Comments

  • Reply 1 of 301
    icoco3icoco3 Posts: 1,457member

    Yet they will sell millions and millions of these things and set new records.

     

    I set a target that analysts will get it wrong again.  How about they investigate the holdings these companies have in Apple.  How nice to drive down the price in the week before it is released and buy cheap just to have it bounce back up when it sells "better than expected."

  • Reply 2 of 301
    I think someone else said it as well: the strategy is a little elusive. If it were for the colour alone, the could have made the iP-C more like the existing iPod, which are simply gorgeous with their aluminium colours. It's a bit strange they chose plastic instead of coloured aluminium.
  • Reply 3 of 301
    One thing I have to say is Apple probably know better than anyone else what a consumer is willing to pay for a phone. It sounds like the stock is down because analysis do not think people will pay the price.

    Again it the ideal of sell at next to no margins so the total unit numbers are high. These analysis only look at one thing unit shipment, they forget that Apple bank account is the largest in the world. verse the guys trying to sell cheap can barely keep the doors open.
  • Reply 4 of 301

    Could just ONE analyst be fired for incompetence, please? One of them. Start small. I need some validation that the entire market isn't now completely full of idiots.

  • Reply 5 of 301
    ANALyst are idiots. the 5C brings last year 5 with the usual $100 reduction, but with a much easier to manufacture (even if it is still very complex so costly) process.

    That means that margins will be better, both from usual repeat orders downcosts & new process. They will probably make more margin on the 5C than on the 5S. On a phone guaranteed to be a success.

    With the addition of docomo & china mobile to add this is big.
  • Reply 6 of 301
    rainrain Posts: 538member
    This makes no sense whatsoever.

    Tallest Skill and the other frothing cultists have declared yesterday the single most important moment in all humanity - the greatest innovation of all collective human experience and knowledge was rolled out in a plastic phone...

    how... how can this be?


    This is why...
    http://www.theonion.com/articles/apple-unveils-panicked-ideafree-man-at-launch-even,33814/
  • Reply 7 of 301
    They set themselves up perfectly for next year.

    Next year the iPhone 5C becomes $449.
    The iPhone 5S becomes $549 and $649
    and the iPhone 6 with a 4.5 inch screen becomes $649 upward.

    Really a beautiful move.

    - 5C = reworked from the iPhone 5 because of the iPhone 5's scratch problems and I think they wanted to change internals (China Mobile band?)

    - 5S = Needed to keep the same form factor because of accessories and equipment that make these phones. Lots of innovation otherwise. Fingerprint sensor will be awesome.

    - China Mobile = will come; they will ease into it

    Only one thing lacking in iPhone innovation, the screen-size. That's it. Otherwise they did a fantastic job. None of this is easy.
  • Reply 8 of 301
    rainrain Posts: 538member
    Quote:
    Originally Posted by Maestro64 View Post



    One thing I have to say is Apple probably know better than anyone else what a consumer is willing to pay for a phone. It sounds like the stock is down because analysis do not think people will pay the price.



    Again it the ideal of sell at next to no margins so the total unit numbers are high. These analysis only look at one thing unit shipment, they forget that Apple bank account is the largest in the world. verse the guys trying to sell cheap can barely keep the doors open.

    It's because of a few factors:

    - No TV

    - Mac Pro rumored to cost $8,000

    - No vision for the future

  • Reply 9 of 301
    Originally Posted by rain View Post

    This makes no sense whatsoever.

     

    Maybe if you weren't a troll account, people would care what you have to say.

  • Reply 10 of 301
    Quote:

    Originally Posted by rain View Post



    This makes no sense whatsoever.



    Tallest Skill and the other frothing cultists have declared yesterday the single most important moment in all humanity - the greatest innovation of all collective human experience and knowledge was rolled out in a plastic phone...



    how... how can this be?





    This is why...

    http://www.theonion.com/articles/apple-unveils-panicked-ideafree-man-at-launch-even,33814/

     

    Have you looked in a mirror? I mean, why do you even read this site if you think it is full of cultist? And really, get an original thought in your head.

  • Reply 11 of 301
    pmzpmz Posts: 3,433member

    Munster was expecting Apple to sell 50 million $300 iPhones in 2014, growing to 100 million in 2015, with 15 percent gross margin.

     

    Oh its so rich! Instead, Apple will:

     

    Sell 40 million $550 iPhones, growing to 90 million in 2015, with a 40% percent gross margin.

     

    AKA, Apple makes a crap load more money than the idiot's prediction, and sells almost as many phones.

  • Reply 12 of 301
    tzeshantzeshan Posts: 1,876member

    The street always give the wrong reason of why a stock goes up or down.  AAPL began dropping yesterday after 11AM PT when the show was over.  The price of 3C was announced much earlier.  It seems the investors was waiting for the one last thing that is a 5 inch iPhone.  Apple has missed a huge market which is every bigger than iPhone.  The combined sales of larger smartphones are bigger than iPhone.  With a bigger iPhone Apple can resume growth. 

  • Reply 13 of 301
    gwmacgwmac Posts: 1,795member
    This pricing seems very shortsighted. They seem to want to maintain their extremely high profit margins at the cost of losing market share and customers. I didn't agree with some idiot analysts that suggested it should sell around $300 but I do think they could have still made a very hefty profit at $459 unlocked. There is a big middle ground between $300 and $549. That is not cheap by any means but would at least have been more attainable to tens of millions more consumers than the $549 here in the U.S. or the $733 price it will be sold at unlocked in China. They made absolutely no concession in pricing and just repeated the previous pricing model and stuck last years phone in a plastic shell. As a stockholder I really hope I am proven wrong and it sells beyond the wildest expectations in BRIC type countries and in the 1st world as well but I just don't see that many Chinese paying $733 for this iPhone. The ones on China Mobile that desperately want an iPhone will now likely just pay a little more to get the 5S instead. People worried that the 5C would cannibalize sales. The reality id it appears the 5S will cannibalize sales from the 5C since they are priced so close.

    But like 2 previous posters said I think this pricing might have been necessary because this is a transition year. next year they will be able to offer the 5C for $449 along with a full sized iPhone model addition. A larger iPhone along with a cheaper one that also offers LTE will allow Apple to grow. The question is whether they waited too late and now so many people are locked into the Android ecosystem if these people can be pulled in or not. Switching ecosystems is not an easy process especially for many games which will not transfer progress for example.
  • Reply 14 of 301
    I am a bit surprised on the pricing but I am sure they will sell millions. it is worth it to see Gene eat crow.

    Having said that, I want everyone who doubted Ming to apologize. The guy is well connected and proved 100% accurate. I'm waiting... and I told you so.
  • Reply 15 of 301
    If IPhone is cheap , those sons of a bitches will worry the profit gross will be affected .
  • Reply 16 of 301
    As with the PC wars now largely concluded, the mobile wars will eventually resolve to a more nuanced analysis. The value of the software that Apple now provides for free should be a significant factor in any cost/benefit analysis. There are other factors as well. However, the unwashed bi-peds of the forest are unable to consider more than one variable at a time. These are not customers that Apple wants or needs.
  • Reply 17 of 301
    drblankdrblank Posts: 3,383member
    I think the analysts are missing the entire concept of Apple not going after the $150 or less market. That market segment makes ZERO profits.

    I would be getting excited that Apple is transitioning to 64 bit far ahead of anyone else.
  • Reply 18 of 301
    Who cares about what Wall Street thinks. They're the ones who thought Apple was going to fail the past decades. Apple does what it needs to do because it knows what it's doing.
  • Reply 19 of 301
    AAPL, under Cook & Co, can't get a darn thing right! He is the Steve Balmer/Jerry Yang of Apple. And what the hell is with those yucky colors? Is Jony Ives color blind? Here we are back in the mid $400s and sinking thanks to Cook's management.
  • Reply 20 of 301
    Quote:

    Originally Posted by rain View Post



    This makes no sense whatsoever.



    Tallest Skill and the other frothing cultists have declared yesterday the single most important moment in all humanity - the greatest innovation of all collective human experience and knowledge was rolled out in a plastic phone...



    how... how can this be?





    This is why...

    http://www.theonion.com/articles/apple-unveils-panicked-ideafree-man-at-launch-even,33814/

    Lol, that was good! "Apple Unveils Panicked Man With No Ideas" <img class=" src="http://forums-files.appleinsider.com/images/smilies//lol.gif" />

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