Skip to main contentSkip to navigationSkip to navigation

Apple shares fall 5% as analysts hit out at iPhone pricing

This article is more than 10 years old
Three major banks downgrade company's shares on disappointment about lack of low-cost iPhone

Apple's new iPhones - launched with the traditional hype on Tuesday - have received a cool reception from the market and analysts.

Three major banks cut their recommendations from buy to neutral, citing disappointment that there was no lower priced iPhone unveiled and cautious about the company's prospects in China. The 5C, rumoured to be a budget phone, in fact costs £469 out of contract, while the top of the range 5S is £80 more expensive. Analysts at Bank of America Merrill Lynch said:

We downgrade to neutral on (1) lack of a "lower-end" iPhone and price points that will be too high to increase penetration in emerging markets (2) no China Mobile agreement, (3) a likely less than expected impact from China Mobile, when/if a partnership is announced, (4) another "evolutionary but not revolutionary" iPhone product launch, and (5) risk to near term gross margin percentage estimates, given typical lower margin on new iPhones (in this case both 5C and 5S, as opposed to only one new launch).

Credit Suisse was also unhappy with the iPhone pricing:

We remain disappointed with Apple's decision to remain a premium priced smartphone vendor, and this continues to competitively expose the company and limits its total addressable market and growth. Given a lack of market expansion and lower iPhone sales potential, we lower earnings per share by 8% for 2014.
Both products are premium devices, which have specifications not quite on par with that of other high-end smartphones.

And UBS joined the chorus:

We are downgrading Apple on the concern that Apple's pricing strategy will hamper the company's ability to be competitive in key growth areas in the smartphone market, particularly in China. We were surprised by the high price of the 5C at just $100 under the 5S without a contract, leaving little differentiation. Apple said that two phones replace the old 5, leaving the 4S as the low-end option – a three-year-old form factor.

And the market reaction? Apple's shares have opened 5% lower at $469.

Ironically UK chip designers which supply Apple, Arm and Imagination Technologies, are both sharply higher.

Comments (…)

Sign in or create your Guardian account to join the discussion

Most viewed

Most viewed