As Buyers Seek Cheaper Devices, Apple iPhone Price Come Under Pressure

The average selling price for the handsets likely declined over the holidays, a crucial period for Apple, analysts say, in a sign that customers are opting for less expensive models.

Analysts said that rather than the iPhone 7, introduced in September, some purchasers are settling for older iPhone 6S models.

“Recent smartphone customers increasingly are opting for the iPhone 6S,” Barclays analyst Mark Moskowitz wrote in a note to clients this week. Thius week he downgraded his recommendation on Apple stock to hold. “We detect increasing concern among industry participants that smartphones in general have evolved technologically to become more than good enough to serve most users’ digital needs over multiple years or until the device breaks.”

On Jan. 31, Apple is scheduled to report quarterly results. According to estimates compiled by Bloomberg News, down from $691 a year earlier, an average selling price, or ASP, of $688 for the iPhone line in the holiday quarter, analysts currently predict. an increase in ASP, compared to previous year, is noted every time a new iPhone is launched.

Therefore potentially customers were not drawn away from the 6S despite the iPhone 7’s better camera, faster processor, improved battery life and water resistance which is suggested by an ASP decline. Hence to maintain the bonanza iPhone revenue growth that the Cupertino, California-based company used to enjoy, it is not enough to have  smartphone advances nowadays as the trend underscores.

“We know what a smartphone looks like and does,” billionaire technology investor Peter Thiel told the New York Times recently. “It’s not an area where there will be any more innovation.”

As falling iPhone sales dragged down the total, representing the first drop since 2001 was Apple’s revenue decline in the last fiscal year, which ended in September. According to researcher IDC, industrywide smartphone shipments were likely flat in 2016. The market was growing more than 10 percent a year as recently as the second quarter of 2015.

Up from 75 million handsets a year earlier, Apple is likely to have sold about 76 million phones over the holiday quarter, according to the average of analyst estimates compiled by Bloomberg News. With surging sales from the App Store and Music streaming service compensating for any dip in iPhone takings, analysts expect revenue to rise 2 percent to $77 billion.

The iPhone still accounted for almost two-thirds of Apple’s $216 billion annual sales, even after revenue from services soared last year. the next iPhone, which is likely to be unveiled later this year, the device’s 10th anniversary, will be looked at keenly by investors as there is growing importance of handset and any ASP weakness draw investor attention to new launches.

Apple’s sales forecast for the three months through March would be the gauging meter for ascertaining the demand for this model, which analysts tentatively dub the iPhone 8, 10 or X.

“The iPhone 10 gives Apple a little bit of protection,” said Gene Munster, the co-founder of Loup Ventures and long-time Apple analyst.

The new device gives executives a ready excuse should the March outlook disappoint, he noted. “It’s a good get out of jail free card, since investors want to own the stock for the next product cycle,” Munster said.

(Adapted from Bloomberg)


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