Apple could gain 20% with a less expensive iPhone, says Trefis

“Apple shares are currently trading around an all-time high figure of $180. We believe that the current stock price represents the fair value for Apple’s shares,” Trefis Team writes. “However, the tech giant could potentially unlock a sizable amount of value for investors by introducing a cheaper version of the iPhone to target other segments of the rapidly growing smartphone market. Under such a scenario, we estimate the company’s value could be closer to $215 per share – representing an upside of 20%.”

“The more iPhones Apple manages to get into users’ hands, the more revenues it can generate through its closed ecosystem – a benefit none of its rivals have,” Trefis Team writes. “We estimate that the introduction of a meaningfully cheaper iPhone variant could boost iPhone sales to 300 million a year (up from 232 million under the base case scenario).”

“While cheaper iPhones will have a negative impact on Apple’s margins, we believe that this decline will be more than made up for by revenue gains from Apple Services, which is a high-margin revenue stream, as well as from the sale of other hardware and accessories (like the recently launched HomePod), which have margins in excess of 30%,” Trefis Team writes. “Accordingly, we expect the overall margin to improve to 23% (from 21.6% under the base case scenario).”

Much more in the full article here.

MacDailyNews Take: With iPod, Apple dove down market great success. With iPhone SE, the company is sort of dipping a toe into the water, perhaps rightly so as iPhone already takes more revenue than all other makers combined and dominates in profit share.

After all, how many HomePods, AirPods, Apple Watches, Apple Music subscriptions, etc. would Apple really sell to the type of customer who’s looking for a cheap iPhone?

With the Mac, iPhone, iPad, and Apple Watch, Apple has proven that cornering the market on quality customers, those with disposable income and the will to spend it, trumps amassing the most users.

Android is, as it ever was, the poor man’s iPhone. Apple takes the grain and leaves the also-rans with the chaff.MacDailyNews, February 7, 2018

SEE ALSO:
iPhone X drives smartphone revenue dominance; Apple made more money in Q417 than the rest of the smartphone makers combined – February 16, 2018
Apple iPhone took more than half of worldwide smartphone revenue share in Q417, a new record – February 15, 2018
Apple utterly dominates the premium smartphone market in China with 85% share – February 7, 2018
Apple leads in Indian premium smartphone market share, capturing 47% share in Q417 – January 31, 2018
Apple App Store users spent nearly double that of Google Play users in Q417 – January 26, 2018
Apple’s iOS continues to attract content apps first, despite smaller unit share – October 30, 2017
Strategy Analytics: Apple has shipped 1.2 billion iPhones in the past 10 years; $760 billion in global revenue to date – September 8, 2017
Bernstein: Google to pay Apple $3 billion this year to remain the default search engine on iPhones and iPads – August 14, 2017
Apple took 83% of smartphone market profits in calendar first quarter – May 16, 2017
How important is Apple’s iPhone market share? – May 29, 2017
Higher income U.S. states use Apple iPhones; lower income states use Samsung Galaxy phones – September 27, 2016
iOS users are worth 10X more than those who settle for Android – July 27, 2016
Apple’s App Store revenue nearly double that of Google’s Android – April 20, 2016
Poor man’s iPhone: Android on the decline – February 26, 2015
Study: iPhone users are smarter and richer than those who settle for Android phones – January 22, 2015
Why Android users can’t have the nicest things – January 5, 2015
iPhone users earn significantly more than those who settle for Android phones – October 8, 2014
Yet more proof that Android is for poor people – June 27, 2014
More proof that Android is for poor people – May 13, 2014
Android users poorer, shorter, unhealthier, less educated, far less charitable than Apple iPhone users – November 13, 2013
IDC data shows two thirds of Android’s 81% smartphone share are cheap junk phones – November 13, 2013
CIRP: Apple iPhone users are younger, richer, and better educated than those who settle for Samsung knockoff phones – August 19, 2013
iPhone users smarter, richer than Android phone users – August 16, 2011

14 Comments

  1. Yes. Right. ANALyst talking.

    And if Apple ever goes the cheaper iPhone route, their stock will dive due to all the negative forecasts of lower ASPs.

    Apple can never win.

    1. Wall Street greed strikes again. How often does market share percentage rear it’s ugly head? “If only Apple went after smartphone market share like all other smartphone companies do, Apple would increase it’s market share percentage by double-digits. Maybe. However, it appears Apple isn’t interested in doing so. This analyst wants Apple to put even more weight on iPhone sales. I believe Apple should continue its current course in iPhone sales and look for other means of increasing revenue besides the iPhone.

      As you say, Apple will definitely be hounded by analysts cursing Apple’s lowered iPhone profit margins. I’m sure greedy investors expect Apple to sell more iPhones at current profit margins without compromise. Apple’s iPhone business seems to be going well enough. Apple needs to focus on growing services revenue and create or acquire some other businesses to have a wider revenue base.

    1. an Apple-designed take on the “candy bar” sized phone would meet the function and financial needs of many. Calls, texts, music and other functions where a large-ish screen isn’t needed. ASP? So what…esp, if it finds a secure revenue pocket.

  2. Apple will eventually enter the low price iPhone and watch market once they make the big push into healthcare. The potential service revenue will more then make up for the lower margins on low cost hardware.

  3. Gaining market share with low margin units is wrong.

    However pushing the competition increasingly into lower margins areas is good strategy. Apple did that effectively with the iPod and is doing this now with the iPhone SE. This is a very successful approach and recycles designs that were used in previous high end models.

  4. Since when has Apple ever followed the advice of analysts?

    Apple may introduce a somewhat more keenly priced iPhone, but to me it seems less likely than it did a year ago.

    The article does suggest how selling cheaper phones at a lower market could boost Apple Services, but I think that the effect might be being over-estimated because if somebody is buying a cheaper iPhone, I feel that they will be less likely to pay for Apple Services compared to those buying more expensive iPhones.

    The thing to bear in mind is that only Apple has the real figures and they know how many sales they make of every model and who pays for Apple Services. I’m sure that Apple have carefully assessed the implications of selling a cheaper iPhone.

  5. The LCD iPhone X-like device is their cheaper phone. They will likely price it just below the current iPhone 8, and they will sell as many as they can make. A spec bumped SE will likely still be sold for $349. They may even keep the original SE around for developing markets at $249.

    1. Profits or no, you do realize Amazon is going to be worth more than Apple by the end of the year. Wall Street is practically wagering on it to happen and they’re going to make it happen by pushing the P/E into the stratosphere. I have never seen a company praised the way Amazon is for destroying rival companies. Big investors will be dancing in the street when Amazon is the only retailer left. Amazon will be the one monopoly that won’t be touched by the feds.

      1. Without Profit you aren’t worth anything, a low margin retail outfit isn’t going to flip a switch and suddenly make a profit. That’s the Ponzi part of Amazon….

        1. You do realize that growing businesses plow their cash flow back into company and employee development, right? A company that maximizes short term profit for investors won’t last long. Amazon has issues but its leaders are far more forward thinking than many of the cow-milking idiots at Apple who accidentally design themselves into thermal corners (their words). Apple management is allowing competition to pass them in many areas. Worse, they financially support their direct competition by buying Samsung screens and chips, renting Amazon servers, etc. Going downmarket is the least of Apples problems. Offering a wide array of consumer friendly products that aren’t entirely reliant on always-on, hackable iCloud mess is forever going to be the weight. The second Apple’s iOS or iCloud is breached, the walled garden will come tumbling down. Thanks to idiot management, Apple doesn’t have enough fresh non-ios products to put in your eye. All Apple dorks have been pushing is subscription based ios stuff.

          1. That’s the big lie about Amazon, don’t worry we are making a profit as low margin retail company and we putting the back into the company everything cool Ha Ha Ha…..Wall Street doing good..
            Another lie is that Amazon has the cash for R&D.

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