Apple stock tumbles following debut of new iPhones
After little movement on Tuesday, the stock falls in Wednesday morning trading. Might that have something to do with the price of an unlocked iPhone 5C?
Wall Street has reacted negatively to Apple's latest iPhones this morning.
On Tuesday, the stock closed just a little more than 2 percent down and nestled in at $494, a sign that the Apple event likely triggered an initial "meh" from investors. But as of Wednesday morning, shares have been roughed up a lot more.
In pre-market trading Wednesday morning, the stock plummeted more than 5 percent to $467. Since the market opened at 9:30 a.m. ET, the shares were hovering in the $469-$470 range before dropping back to the $467 mark.
Investors are still waiting to see how Apple's new lineup will add to the company's bottom line. The iPhone 5S offers just enough new features that it will likely lure a healthy number of new buyers and upgraders. The iPhone 5C is a bigger question mark.
The 5C has so far disappointed many analysts, not so much for its features but for its $549 unlocked price. Many on Wall Street had expected the 5C to be Apple's attempt at a low-cost iPhone. As such, it would be geared toward consumers in emerging markets who don't enjoy carrier subsidies and can't afford the lofty price of an unlocked iPhone 5.
Some of those same analysts had been predicting a non-subsidized price of around $300. Imagine their surprise when Apple revealed the 5C's $549 price tag.
Bernstein Research analyst Toni Sacconaghi, Jr. called Apple's failure to launch a low-cost iPhone a missed opportunity.
"We worry that Apple's inability/unwillingness to come out with a low priced offering for emerging markets nearly ensures that the company will continue to be an overall share loser in the smartphone market until it chooses to address the low end," Sacconaghi said in an investors note released Wednesday.
In a report entitled: "So Much for a Low-Priced iPhone to Penetrate Emerging Markets," Citi analyst Glen Yeung also expressed surprise at the price for the unlocked 5C.
"At this level, we do not expect the iPhone 5C to meaningfully penetrate emerging markets without substantial subsidy, noting that phones priced above $300 account for just 13.7% of the global handset market and the average price of a premium phone in China is 23% below the US (and the gap is expected to widen)," Yeung said.
Even Apple bull Gene Munster said he was disappointed over the 5C pricing, prompting him to trim his sales and earnings per share estimates for Apple for this year and next. Still, the Piper Jaffray analyst believes Apple could position the 4S as the new low-cost iPhone.
"While we are disappointed that the 5C was not a lower price targeted offering, we believe Apple could be aggressive with the 4S pricing to try to compete at a lower price level, potentially around $400," Munster said.
Bucking the trend, Canaccord Genuity analyst Michael Walkley thinks both the 5S and 5C will boost Apple's bottom line. Citing Apple's aggressive launch plans for more than 100 countries, including China, Walkley raised his estimate for iPhone sales for fiscal 2014 in a report out Wednesday.
With a standard two-year contract, the 5C does ring in $100 cheaper than the 5S.
But just who's going to buy the 5C? And how much will it help Apple reclaim sales and market share around the world? Those are just a couple of questions likely on the minds of investors. And the answers won't start to arrive until after the new phones launch on September 20.
"This higher price point could be good for the gross margin profile of the iPhone portfolio, but we had thought a price point closer to $350 could drive greater market coverage, particularly in emerging markets, setting the stage for accelerating growth," JP Morgan analyst Mark Moskowitz said in an investors note on Wednesday. "This sort of growth could still happen, but we need to see how the first quarter or two of 5C customer adoption develops given the higher price."
