Analyst: New ‘budget’ iPhone could be priced at $700+

From a note to clients by RBC’s Amit Daryanani that landed in my inbox Sunday:

Details have begun to emerge about the next generation of iPhones that we think AAPL will launch in September timeframe. We expect AAPL to introduce three new phones: an update to the current 5.8″ iPhone X (iPhone XI?), a larger 6.5″ OLED device (iPhone XI Plus?) and a budget-friendly 6.1″ LCD iPhone (iPhone 9?). Clearly, naming of these phones is becoming a complicated process. Effectively we would have three phones with two being OLED and one “budget” friendly LCD model.

The most interesting dynamic to watch will be pricing, specially considering the limited success iPhone X had with $1,000+ ASP. We think the LCD model could drive the highest volumes (~35-50% of volume) and could be priced at $700+. Furthermore, the refreshed 5.8″ OLED (XI) could be priced at $899 ( $100 cheaper vs. current iPhone X) and the larger 6.5″ OLED could be priced at $999 – this would effectively lower the average ASP’s but we think will drive a stronger unit growth.

Overall, we think the focus this cycle would be around AAPL’s ability to segment market and expand its install base.

Net/Net: Maintain OP and $205 target as we see host of tailwinds – capital allocation, services growth, gross-margin upside and attractive valuation.

My take: Despite what Daryanani characterizes as the “limited success” of the $1,000+ iPhone X, the price inelasticity of Apple’s smartphone line remains the envy of the industry.

2 Comments

  1. David Drinkwater said:
    “specially considering the limited success iPhone X had with $1,000+ ASP” [sic]

    I’m not experiencing the same lack of success with the iPhone X. Not only do I own one (which should surprise no-one here), but also I have seen plenty of them “in the wild”. The same is true for Apple Watches. I don’t try to intrude and find out what color crown people have, but I see plenty of Apple Watches.

    I’m impatiently waiting for the Q2 results report, since there will be a lot of new information to talk about: tax reform, repatriation, dividend updates, earnings in a quarter with a very late Chinese New Year. Who knows what else!

    3
    March 26, 2018
  2. Michael Thompson said:
    Yes, of course the iPhone X had limited success because:

    1. Apple only increased its revenue from an all-time high of $78 billion to a paltry $88 billion year over year: Failure of the iPhone X.

    2. Apple only increased its net income from an all-time high of $18 billion to over $20 billion in the first fiscal quarter: Failure of the iPhone X. If Apple repeats the same exact revenue and expense figures in the first quarter of FY2019 as it reported in FY 2018, its net income will increase to $23-$24 billion because of the TRUMP tax cuts.

    3. Apple only increased its EPS to an all-time high of 3.89: Failure of the iPhone X.

    I’m concerned that Apple’s best days are behind it like my favorite Disinformation Specialist (DS) Toni Sacconaghi has repeatedly and wrongly stated for YEARS without any repercussion to his “reputation”.

    Buy Apple, Hold Apple and Buy More on EVERY dip.

    4
    March 26, 2018

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