Apple showed off its new, flashy iPhone 5S yesterday at its unveiling event. But it also showed off another phone, the iPhone 5C. Apple’s taking a gamble, for the first time it’s making 2 models of its iPhone. Also, the 5C is a lower end device and aimed at more of a budget market.
Well, the markets have spoken, and so far it’s not looking good. As The Gaurdian reports, Apple stock is down 5 percent. Prominent financial analysts are chalking the loss up to the iPhone 5C‘s unexciting specs and a price point that’s considered too high.
The Gaurdian quoted Analysts at Bank of America Merrill Lynch explaining its rationale for downgrading Apple’s rating:
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 also took issue with the iPhone 5C’s 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.
Finally, UBS also shared its disappointment with The Gaurdian:
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.
[Via: The Gaurdian]