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Jefferies Downgrades AAPL To $425 Amid iPhone 5S Yields & iPhone 5C Pricing

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A recent report released by global investment banking firm Jefferies has lowered the targeted Apple share price (AAPL) to $425 from previous $450, citing low iPhone 5S yields and the higher price point Apple decided to choose for its iPhone 5C, AppleInsider is reporting.

IPhone 5S

The investment firm’s report highlights that Apple is set to produce up to 7 million fewer iPhone 5S models in Q4 than had previously been expected, indicated by the fact that its mainstream suppliers have started to received build cut plans. Furthermore, Jefferies’ sources claim that production yields on iPhone 5S Touch ID fingerprint sensor “have been terrible”, though other newer technologies included in Apple’s latest flagship smartphone, including the A7 and the M7 motion co-processor, are not creating any production issues.

Similarly, Jefferies’ report points out that iPhone 5C is “priced like Apple’s prior generation handsets rather than to a new level,” suggesting that Apple should have priced it even lower than this:

Jefferies’ assessment jibes with previous statements from well-connected KGI Securities analyst Ming-Chi Kuo. Kuo has been predicting short supply of the iPhone 5s since July, due to production issues surrounding the Touch ID sensor. Kuo, though, expects production to pick up after an initial period of limited availability.

The other factor in Jefferies’ price downgrade is the price point Apple chose for its iPhone 5c. The idea that Apple was preparing a lower-cost phone had been generally accepted since early this year, but analysts, investors, and Apple fans were anxious to see just where the iPhone maker would price its new, polycarbonate-backed device.

Majority of market watchers who have downgraded Apple’s stock price targets have been those who were hoping that Apple would price the iPhone 5C around $400 off-contract, which clearly did not happen.

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  • FragilityG4

    Yawn … How many times have these analyst down graded the stick before a launch only to be surprised at the phones movement.

  • Supacon

    Basically, Apple has been incredibly successful doing what they have been doing; because they are essentially still doing the same, they are doomed to fail. Analysts love getting their panties in a bunch when Apple doesn’t do what they hope it will do.

    Seriously, though, eventually the price of smartphones will come down, but Apple isn’t going to alienate their customers and fans by trying to suddenly jump into the ‘low-end’ space. That’d work as well as the Soviet Union suddenly becoming capitalist.

    There are two ways they could have made a ‘low-cost’ phone:

    1. Produce a *cheap* phone with two-year old specs and price it the same as the 4 was priced at ($450 unsubsidized, $0 on contract). Market the shit out of it. This would dilute Apple’s brand and cachet as a purveyor of high-end luxury products and significantly cut into the hefty margins that they depend on.

    2. Sell a cheaper-to-manufacture iPhone 5 and just price it at $450-$500. This would alienate and upset those who just recently paid $700+ for a phone which now costs substantially less. It would also dilute the prestige of their brand as above and make a high-end phone a much tougher sell, so they’d have to probably cut the price of that too. Why would they cannibalize sales of their own devices or reduce their margins? All iPhone owners have bought the device at the current pricing structure anyways, and most will continue to do so.

    If you think about it, the way that Apple has priced their new devices makes perfect sense and there was really no other reasonable way to approach it.

    Looking forward, their prices will go down. Every year the 5c will undergo a price reduction. In 2 years, they’ll likely be selling the iPhone 5c (at least in some markets) for $200-$300 less, and it will be highly competitive in price, features, and quality with the mid-range smartphones of that time.

    That’s the obvious strategy to capture the ‘low-end market’. Apple is playing the long game.

  • screwed again

    princing is actually not bad since they started the trade-in program. So potentially you can get $100 off of Iphone 5c if you trade in your old iphone. Down in the states you can get the 5c for free with a trade-in but thanks to the big 3 offering 5c at $150 with 2 yr plan, you still need to shell out some cash

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