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

Posted:
in AAPL Investors edited January 2014
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.

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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.
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Comments

  • Reply 1 of 96

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

  • Reply 2 of 96
    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
  • Reply 3 of 96
    jungmarkjungmark Posts: 6,647member
    Damn analysts!! Always coming out with negative views about Apple!! Oh... wait...

    They did downgrade AAPL.
  • Reply 4 of 96
    pazuzupazuzu Posts: 1,728member
    The bad analysts, the good analysts.
    Who cares ? - as long as I can get hold of a 64bit Bling iPhone Friday.
  • Reply 5 of 96
    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!
  • Reply 6 of 96
    gtrgtr Posts: 3,231member
    mj web wrote: »
    Based on its new products I can confidently say APPLE SUCKS!

    No, no.

    Just your perception does.
  • Reply 7 of 96
    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!

     

    Stupid. Moron 

  • Reply 8 of 96
    mj web wrote: »
    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)
  • Reply 9 of 96
    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.
  • Reply 10 of 96

    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.

  • Reply 11 of 96
    mj web wrote: »
    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!
  • Reply 12 of 96
    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).
  • Reply 13 of 96
    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.
  • Reply 14 of 96
    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.
  • Reply 15 of 96

    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.

  • Reply 16 of 96
    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?
  • Reply 17 of 96
    wardcwardc Posts: 150member

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

  • Reply 18 of 96
    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............................

  • Reply 19 of 96
    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...
  • Reply 20 of 96
    rogifanrogifan Posts: 10,669member
    inkling wrote: »
    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.
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