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Wednesday, September 11, 2013

Buy! Sell! Hold! Analysts Offer Different Views on Apple

The stock market really doesn’t like the new Apple iPhone 5C, or at least the price of it. As Apple’s stock fell more than 5 percent on Wednesday, analysts were all over the map with their reactions to the company’s new phones and sales strategy.

Apple said Tuesday that its new iPhone 5C and iPhone 5S would be available in the United States, Japan and China. Many hope the less-expensive phone, the 5C, will help Apple improve international sales, but there is concern that the price isn’t low enough to lure new customers.

Analysts at UBS, the giant Swiss bank, were not impressed and downgraded Apple’s stock to neutral. In a report written by Steven Milunovich, an analyst with the bank, the concern was that Apple could not compete with other smartphone makers in those countries. “A recent survey of 35,000 Chinese consumers conducted by ChinaDaily.com indicated that only 2.6% of respondents would consider purchasing the iPhone 5C at the $549 (Rmb4,488) level,” Mr. Milunovich wrote.

Price worried other researchers, too. The iPhone 5C costs twice as much as some rival smartphones, including the Xiaomi Mi3, which starts at $327 for the 16-gigabyte model and $408 for the 64-gigabyte version.

“IPhone 5C pricing was higher than what many were expecting at $550,” wrote the Baird equity analyst Will Power in a report to investors. ”Although we continue to believe that China is an important long-term opportunity for Apple, recent China results have disappointed.”

But there were some analysts and investors who came to the company’s defense and said that Apple knew exactly what it was doing, and set the price accordingly.

“Anyone expecting Apple to come truly down market with the iPhone 5C was fooling themselves,” said Tony Cripps, principal device analyst at Ovum, the research company, in an e-mail. “The day that happens is the day the company signals that it has run out of headroom for expansion.”

By extending sales of the iPhone to these new foreign markets, some predicted that Apple would sell more iPhones.

“The inclusion of China from Day 1 and a total of 100 countries by December 2013 is set to boost demand for iPhone 5S and 5C to unprecedented levels, putting significant pressure on the supply chain,” said Ronan de Renesse, principal analyst with Analysys Mason, a consulting firm. Mr. Renesse said that he expected Chinese buyers to purchase over 200 million smartphones by the end of 2013, “nearly as much as North America and Europe combined.”

Of course, if sales of the company’s less expensive model disappoint, Apple has the ability to drop the price, as it has in the past.

On Sept. 5, 2007, a couple of months after the release of the first iPhone, the company dropped the price of its new product to $400 after customers and analysts complained that the original $600 price tag was too high.

While people at the time lambasted the company for the price drop, since 2007, the company has sold upward of 250 million iPhones.

With that in mind, it would not be surprising if Apple at the end of quarter announced that it had sold more iPhones than ever before.