Analysts fairly enthusiastic over Apple’s stunning $200 iPhone price cut

Apple Store“In general, the Street reaction [to Apple’s $200 iPhone price cut] is fairly enthusiastic; the interpretation is that the company can now ramp up its share in the highly competitive handset market. But there are margin implications from cutting the price by a third, offsetting the expected volume gains. In the end, most analysts simply left their estimates in place,” Eric Savitz blogs for Barron’s.

Savitz provides a quick run down on this morning’s thoughts on Apple’s news from the Street. Some exceprts:

• Ben Reitzes, UBS: Called iPhone price cut “a stunner.” Says, “while investor reaction to the iPhone price cut could be negative near-term, we believe unit demand will be stimulated and the jury is still out.”

• Bill Shope, J.P. Morgan: Encouraged that investor expectations for the device are set to become more realistic and that the lower price point can stimulate units this holiday season.

• Chris Whitmore, Deutsche Bank: Expects lower iPhone price point to drive incremental demand; says Apple is “likely willing to concede lower near-term hardware margin in order to capture a recurring, monthly annuity from AT&T.” He says “the net financial impact” should be “additive.

• Gene Munster, Piper Jaffray: Price cut is a “surprise,” but should accelerate adoption.

• Andy Hargreaves, Pacific Crest: Asserts that “the price decline will prompt increased unit volume.”

• Kathryn Huberty, Morgan Stanley: Views price cut at “a positive move to stimulate holiday demand in a high volume, high margin segment of the business,” and says the cut “could generate meaningful incremental unit demand.”

Much more, including comments relating to the new iPod lines, Mac sales, and more here.

[Thanks to MacDailyNews Reader “Joe Architect” for the heads up.]

19 Comments

  1. @snafu

    “The $200 I overpaid for my iPhone pales in comparison to the $10 beating my AAPL stock has taken in the past two days.”

    Dang it. I just purchased 25 shares of AAPL @ $140!

    MDN MW: less, as in “less is more?”

  2. @snafu

    time to buy more shares!!!

    I did! ” width=”19″ height=”19″ alt=”smile” style=”border:0;” />

    Is everyone waitng for Jobs to come hold your hand and feel your pain. EARLY adoption is always (read that word again – if it didn’t sink in) ALWAYS expensive. Most especially in the consumer electronic world.

    Example – I built my first prototype of an invention I have developed – all in all it cost $1.5 million in RD&D;costs and ten years of work and BS&T;… It will sell for $795 each. And zillions will be sold – I can guarantee it! How long will it take recoup my RD&D;?

    And what of the continuing RD&D;? etc? That is why you do not pay Soviet prices for quality goods. You are an active consumer.

    So quitcherbitchen!

  3. @ Samwise

    Sorry to hear that! Don’t worry, it *should* go back up again – and higher than before too ” width=”19″ height=”19″ alt=”smile” style=”border:0;” />

    Gene Munster’s analysis is the one to watch – he’s been the most accurate, although aggressive, in his estimates.

  4. I know $ 200 drop is steep. But don’t you know how the cell phone market will work before you buy. ??

    Early adaptors are at bleeding edge, you get all the “wow” , then don’t complain now.

  5. “But there are margin implications from cutting the price by a third, offsetting the expected volume gains. In the end, most analysts simply left their estimates in place”

    Further proof the analysts are idiots! If Apple sells each iPhone for $200 less, and because of this sells an extra 1 Million phones, they will have recurring billing from 1 Million users because of the AT&T;contracts! This is worth much more than the $200 price cut, meaning more profits!

  6. After this price drop I am seriously considering switching to Cingular and getting an iPhone. I wish there was a 30 GB model, and I wish the Digital Camera was at least 4 Megapixels, but that will never happen. (at least not for a long time).

    If the iPod touch had Mail & iChat I would sign up for it in a heartbeat. I still don’t understand why the iPhone does not have iChat, but oh well….

    We’ll see if I end up getting it, but it does sound more tempting with this lower price.

  7. Apples share price just tanked… I think they should refund the money I lost on the share price… Wait, do I have to *give* back Apple money I got when the price went up?

    I haven’t bought my iPhone yet.. And I just saved $200… so that means I have to share some of that savings with uh Apple, so uh… ooh my head hurts from all this.

  8. When I purchased my iPhone soon after introduction, my kid wanted one. I said no, wait a couple of months and they will be much cheaper. I was right, the bad news is the kid now expects me to get him one. New excuse, wait until Oct. the new 16 GB version will be out then…

  9. If you don’t like paying the stupid tax don’t wait in line to buy a new Apple product the day it ships.

    I think the price drop is great. I thought the original price was way too high. Apparently Steve agreed.

  10. Clearly the initial prices for the 4 and 8 gigs were set before the 16 gig chips became available, and now that they are it’s an 8 and 16 gig capacity. Early adapters ALMOST ALL knew that a 16 was on the way, and most people knew that 4 and even 8 was inadequate, YET, knowing all that, they wanted it Now. And Apple took flack because of the high initial prices which helped to ration limited initial supply whilst production ramped up. To-day, some analysts are saying Apple will sell more units at perhaps a lower margin (this before the 16s are available, when the price will go up again) but take monthly fee revenue to compensate. I just bought another 100 shares, because Apple is going to clean the clocks of some competitors in the phone business.

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