Gene Munster, senior research analyst at Piper Jaffray believes that there is a 60 to 70 percent chance that Apple Inc. (NASDAQ:AAPL) will introduce a cheaper model of its iPhone this year.
According to him, a lower priced iPhone would serve as a catalyst for the shares of the company, and he estimated that it would generate approximately $6.5 billion revenue for Apple Inc. (NASDAQ:AAPL) in 2013.
Yost Partners was up 0.8% for the first quarter, while the Yost Focused Long Funds lost 5% net. The firm's benchmark, the MSCI World Index, declined by 5.2%. The funds' returns outperformed their benchmark due to their tilt toward value, high exposures to energy and financials and a bias toward quality. In his first-quarter letter Read More
Munster believes the Cupertino-based technology giant would price its non-contract, low-cost model iPhone around $149 to $199, but he emphasized that the price would most likely be $199, because of the company’s reputation of charging a premium to the market.
He noted that Apple’s lowest non-contract iPhone costs $450 (plus taxes and levies), which is the iPhone 4. The price of a non-contract iPhone 4 in China and Brazil is around $490 and $750, respectively.
Munster predicts Apple Inc. (NASDAQ:AAPL)’s cheaper iPhone model would have lower; screen quality, processor, and casing than its existing relatives. He also expects that it would carry a gross margin of around 30 percent, compared with 55% to 60% gross margin of a standard iPhone.
In a research note, Munster wrote, “We had previously built in some expectation for a lower-priced iPhone starting in September 2013. In that quarter, we assumed about 30% of units are lower priced iPhones, which results in an ASP change from the ~$640 level we have consistently seen over the past three years to around $520. We have the cheaper iPhone contributing about $6.5 billion in revenue in 2013 or 3% of total revenue.”
The research firm reiterated its overweight rating and $900 price target for AAPL.
In a related report, there are speculations that a few people in the investment community are concern over reports that a cheaper model of the iPhone would have a negative impact on Apple Inc. (NASDAQ:AAPL)’s high profit margins. It is one of the companies with the highest profit margin and receives high subsidies from wireless providers carrying the iPhone.