The price target for the shares of Apple Inc. (NASDAQ:AAPL) was reduced from $450 to $425 per share by analysts at Jefferies, a global investment banking firm. The stock price of the iPhone and iPad maker is trading around $466.59 a share, down by 1.29 percent as of this writing on Friday afternoon in New York.
Jefferies cut price target after channel checks
Jefferies analysts were prompted to cut their price target for the shares of Apple Inc. (NASDAQ:AAPL) after conducting channel checks and found out that the suppliers of the tech giant started to receive production cuts. Their checks indicated that Apple’s iPhone 5S production is 7 million units fewer than expected in the fourth quarter.
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iPhone 5S fingerprint sensor and pricing are culprits
According to the global investment banking firm, the primary issue affecting the production of the iPhone 5S is the fingerprint sensor. Jefferies said suppliers’ production volume for the TouchID has been “terrible.”
Another reason mentioned by Jefferies analysts for cutting their price target for Apple Inc. (NASDAQ:AAPL) is the pricing of the iPhone 5C. Analysts and investors were expecting a lower cost iPhone intended for consumers in the emerging markets, particularly in China. However, the cost of the new colorful iPhone 5C is similar to the price of the previous model of the iPhone.
Jefferies analysts said the iPhone 5c is “priced like Apple’s prior generation handsets rather than to a new level.” Based on their statement, the analysts were suggesting that Apple Inc. (NASDAQ:AAPL) need to offer the device at a lower price.
Fred Wilson thinks Apple is “clueless”
The analysts at Jefferies were not the only ones disappointed by the pricing of the iPhone 5C. Venture capitalist Fred Wilson called Apple Inc. (NASDAQ:AAPL) is “clueless.” According to him, “The C in 5C does not mean ‘cheap’ as I had hoped. It means clueless, as in clueless about how the vast majority of new smartphone users are paying for their phones.”
The starting price of the iPhone 5C is $99 with a two-year contract and $549 without a contract in the United States. Wilson said the cost of an unsubsidized iPhone 5C is more expensive in China at $700. He pointed out that in other countries, users do not sign for contracts, instead “they buy prepaid sim cards and stick it to their unsubsidized phones.”
Other equity research firms downgraded their rating for the shares of Apple Inc. (NASDAQ:AAPL) from buy to neutral including Credit Suisse AG (ADR) (NYSE:CS), Bank of America Merill Lynch (BAML) and UBS AG (US listing) (NYSE:UBS).