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.
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.