Apple (AAPL) iPhones Refresh Not a Major Catalyst - Susquehanna

September 11, 2013 6:55 AM EDT
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Susquehanna analyst Chris Caso reiterated a Neutral rating and $440 price target on Apple (NASDAQ: AAPL) Wednesday saying this year's iPhone product cycle isn't a significant catalyst. He also comments the "C" in 5C doesn't stand for cheap.

"As usual, there were few surprises from AAPL's well-previewed iPhone launch yesterday," Caso comments. "We think the biggest surprise from an investment perspective is that the new iPhone 5C will be positioned as a midrange phone, and won’t provide much near-term help in addressing lower price points in emerging markets, as some had speculated. We do expect the addition of DoCoMo and China Mobile to represent TAM expansion, but not to represent the significant volume boost that would come from a lower-priced emerging market phone. We therefore maintain our view that this year’s iPhone product cycle isn't a significant catalyst. We do, however, see a more significant catalyst next year, given our expectations for a larger-screen iPhone and as a new product cycle allows the iPhone 5C to be priced more aggressively at China Mobile."

The firm notes the 5C will occupy the middle of the phone lineup, given a price point of $549 without a contract and $99 with a contract. "Rather than having the iPhone 5 drop to the middle as they have done in the past, the iPhone 5 would go away, putting the new iPhone 5S at the high end, and moving the iPhone 4S to the low end. While the cost of the 5C is clearly less than the iPhone 5, it's unclear whether the 5C has a lower cost than the 4S, which previously occupied the middle of the lineup. As a result, we don't expect that AAPL's iPhone margin structure changes appreciably with this new product lineup. In addition, some on the Street were hoping for a much lower price point for the 5C, to enable AAPL to more deeply penetrate emerging markets. Clearly, this isn’t the case, at least for now."

For an analyst ratings summary and ratings history on Apple click here. For more ratings news on Apple click here.

Shares of Apple closed at $494.64 yesterday.

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