Technology

Apple Stock Prices Fall On News of the Expensive iPhone 5C

Apple Stock Prices Fall On News of the Expensive iPhone 5C
Image credit: AP
Apple CEO Tim Cook
3 min read
This story originally appeared on Business Insider

Apple was down 5% this morning. 

Investors are selling after yesterday's iPhone launches failed to excite.

We've seen analysts downgrading the stock, and rejiggering their models to factor in the new phones.

Essentially, everyone expected the iPhone 5C to be less expensive. Without a carrier contract, the 5C will cost $549 in the U.S. and $733 in China.

At those prices, it's just another high-end phone. 

As Walter Piecyk at BTIG, who maintained his buy rating, said, "Yesterday’s announcements were merely a slight modification on a phone release game plan that Apple has been executing on for years."

Instead of making the iPhone 5 $99 after a carrier subsidy, Apple went with the iPhone 5C. The upshot with the 5C is that the plastic case makes it cheaper and easier to make, which should boost margins. 

Apple also announced that it was going to start selling cases, which should also increase margins, and add some extra profits into the mix. 

But, the fundamental problem is that Apple didn't do anything to significantly increase its addressable market yesterday. 

Yesterday's announcement won't change the fact that Apple is getting smoked in China, where it already sells high-end, expensive phones. Analysts were thinking that Apple was ready to release a mid-range phone to increase unit sales. 

Apple didn't announce a deal with China Mobile, the giant Chinese carrier. But, an announcement is expected. It's supposed to come in November now.

However, Piecyk points out that 80% of China Mobile customers are pre-paid, which means they don't get a subsidy on their phone purchase. He estimates that 80% of the pre-paid buyers will be looking to get their first smartphone in the next 3-5 years. 

By pricing the 5C at $700+ Apple is giving up a huge chunk of the market. 

Apple has never, ever indicated that it was interested in chasing market share. 

But, Steve Jobs was notorious for saying one thing, then doing another. Investors and analysts may have thought that his successor, Tim Cook, would do the same thing. They're wrong. 

Cook said earlier this year, "winning has never been about making the most." 

That's not just lip service. He clearly doesn't want to chase market share. 

Today, investors are coming to terms with it.

More from Entrepreneur

Grow Your Business at Entrepreneur LIVE! Join us on Nov. 16 in Brooklyn, NY, to learn from legends like Danica Patrick and Maria Sharapova, pitch our editors, meet with investors, and potentially walk away with funding!
Register here

One-on-one online sessions with our experts can help you start a business, grow your business, build your brand, fundraise and more.
Book Your Session

In as little as seven months, the Entrepreneur Authors program will turn your ideas and expertise into a professionally presented book.
Apply Now

Latest on Entrepreneur

My Queue

There are no Videos in your queue.

Click on the Add to next to any video to save to your queue.

There are no Articles in your queue.

Click on the Add to next to any article to save to your queue.

There are no Podcasts in your queue.

Click on the Add to next to any podcast episode to save to your queue.

You're not following any authors.

Click the Follow button on any author page to keep up with the latest content from your favorite authors.