"Apple's 'mistake' with iPhone pricing turned out to be a 13% revenue shortfall - analyst

Apple's pricing policy to hold down the cost of the iPhone has cost its investors money, according to Needham analyst Laura Martin. The $799 price of the basic iPhone model has not changed since 2020: this has weakened the company's "pricing power" and is a sign of a lack of innovation, she believes. Other analysts remain optimistic: they say keeping prices flat has helped Apple benefit from subsidies in China and given it time to close the AI gap. Seaport Global initiated coverage of Apple with a "buy" recommendation and a growth forecast for the securities of more than 21%, but Jefferies remains neutral.

The launch of Apple's base model iPhone 17 in September at the same price as last year's iPhone 16 ($799) is a serious mistake that shareholders will have to pay for, according to Needham analyst Laura Martin. She is quoted by MarketWatch.

Apple has once again failed to raise the price in line with inflation, while making smartphones more expensive would help boost revenue by 13% from 2019, the analyst explained. Apple has only raised the price of the iPhone once in the past six years: in 2020, from $699 to $799. Today, the device actually costs only $634 when calculated in inflation-adjusted terms, Martin noted. She added that companies with strong positions should raise prices faster than inflation, not just follow it.

"Every year that [Apple] holds prices flat, there is a negative compound interest effect," the analyst wrote.

The company's shares added about 0.6% at the moment in trading on October 1, but then slowed down.

According to Martin, the company's inability to raise prices is due to a "lack of innovation." It is therefore more important than ever for Apple to present a compelling artificial intelligence proposition and focus on "building key applications and unique features" that will enable price management, she added.

The latest iPhone launch also didn't provide a major boost for Apple, MarketWatch believes. For the stock to experience a meaningful turnaround, "you need a catalyst in the form of a new iPhone replacement cycle, which we don't expect in the next 12 months," Ma wrote.

However, JPMorgan analyst Samik Chatterjee disagrees, believing that Apple's current pricing strategy may have advantages. By keeping the price of the base model unchanged, the company can strengthen its position in the Chinese market, Chatterjee said. There, the government provides a 15% subsidy on digital devices priced below 6,000 yuan (about $840), Chatterjee explained to MarketWatch.

Bernstein analyst Mark Newman, for his part, doesn't see Apple's AI strategy as a matter of "life and death" for the company, MarketWatch writes. In early September, he wrote that "while Apple appears to be lagging behind in the AI smartphone space, its users are less feature-sensitive than Android users."

Seaport Global initiated coverage of Apple shares on Oct. 1 with a buy recommendation and $310 target price, suggesting a 21.6% upside to the Sept. 30 close. The company believes in the success of the iPhone 17 lineup and sees potential for further price appreciation due to the possible release of an affordable model next year, CNBC quoted Seaport's note as saying.

Analysts at JPMorgan also recommend buying the company's stock with an Overweight rating. According to their data, demand for iPhone 17 is higher than for iPhone 16, mainly due to users upgrading devices. At the same time, interest from those switching from other platforms was slightly lower than a year ago.

This week analyst Samik Chatterjee from JPMorgan left the target price at $280. His assessment implies the growth of securities by 10%. Along with him, analyst Evercore ISI confirmed his recommendation to buy Apple shares. He raised the target price on them to $290. This implies the growth of securities by 14%.

At the same time, analyst Edison Lee of Jefferies remains more restrained and left a neutral assessment of Apple shares with the target price unchanged at $205.8. His estimate implies a 19% drop in the stock.

This article was AI-translated and verified by a human editor