Barclays said Apple may be losing its traditionally strong pricing power. To expand the user base of the service business, Apple began selling iPhones at lower prices. “The iPhone’s revenue is in line with expectations, but we think the average price is lower,” Tim Long, an IT hardware analyst at Barclays, said in a note to customers on Thursday. ”
Despite the decline in iPhone sales, Apple reported better-than-expected third-quarter earnings and revenue, with shares rising more than 1 percent. The tech giant, led by Tim Cook, reported earnings of $3.03 per share and revenue of $64bn. Wall Street expects earnings of $2.48 per share and revenue of $62.99 billion, according to Refinitiv. Apple’s results were helped by strong demand for iPads and AirPods, as well as growth in Apple’s service business.
IPhone revenue was $33.36 billion, slightly higher than the $32.42 billion estimate, but Long said the average price of apple iPhones would fall 10 percent year-on-year in the fourth quarter. The company now expects average selling prices to fall by 12 per cent in 2019 and by 6.5 per cent in 2020.
Apple unveiled three new iPhones in September: the iPhone 11, the iPhone 11 Pro and the iPhone 11 Pro Max. The iPhone 11 starts at $699, $50 cheaper than last year’s iPhone XR. Lower prices are expected to attract a wider range of customers to Apple’s service business.
Barclays gave the stock a wait-and-see rating and slightly raised Apple’s target price to $236 a share, down from $243.26 at Apple’s close on Wednesday.
Some analysts are bullish about the prospects for a new 5G iPhone to be released next year, but Long believes Apple will not be able to set a high enough price without hurting demand.
Lower price trends, he said, “could pose challenges for 5G, and we believe the average price of a 5G iPhone would be at least $150 more than it is now”.