Apple stock takes a hit after Wall Street hammers iPhone 5c ‘iPhlop’

By , Sep 12, 2013

apple-stocks

Wall Street is a curious bunch. Apple shares dropped by five percent Wednesday morning after analysts piled on with disappointment over the iPhone 5c.

Expecting an inexpensive smartphone costing $400 without a contract, Apple instead unveiled a device priced at $549 unsubsidized.

The departure from the expected script caused some industry observers to downgrade Apple’s shares, citing worries the iPhone maker may have shot itself in the foot when it comes to inexpensive Android alternatives selling in places like China…

But are analysts being nervous Nellies, unable to see the forest from the trees? There may be more to Apple’s Tuesday announcement, bringing some concerned investors off the ledge. A good place to start: injecting just a wee bit of rational thought into the overnight panic.

At $549, the contract-free iPhone 5c is just $100 less than $649 unsubsidized price tag for the flagship iPhone 5s, also announced Tuesday. Bank of America, UBS, Credit Suisse and others started today by downgrading (via CNN Money) Apple to “neutral,” sending the company’s stock down after opening at almost 468. By just after noon, shares were trading at 465.36.

green iPhone 5c front and back

All of which follows the investing maxim: buy on the rumor and sell on the news.

The rumor that Apple would unveil a cheap iPhone had fueled stock purchases. But once reality set in and Wall Street learned Apple wasn’t ready to slit its throat when it came to profit margins, people began selling the news.

iPhone 5s and 5c off contract prices

Now comes a chorus of Wall Street prognosticators acting like children disappointed their dreams of some Christmas in China didn’t come true. For example, Goldman Sachs analyst Bill Shope (via Fortune) put it this way: “…Pricing for the 5c was a key disappointment…”The ‘low-end’ 5c was nowhere to be found…,” remarked Timothy Arcuri of Cowen.

Green iPhone 5c

Lost somewhere in the disappointment that the device labeled the iPhone 5c was not low-cost, was Apple’s announcement that the iPhone 4s was now free. Free probably qualifies as low-cost, the only difference is the name of the device. Analysts wanted the cheap iPhone to be the iPhone 5c, not the iPhone 4s.

While many commented that the iPhone 5c was simply a marketing gimmick – having the guts of an iPhone 5 wrapped in a colorful plastic shell – the handset may in the end be Apple’s way to enter the inexpensive market at its own pace.

Gene Munster, the Piper Jaffray analyst who’s become an old hand at Apple-watching, took note of the intriguing possibility.

white iPhone 5c flat

“The fact is, Apple doesn’t know what demand for the iPhone 5c will be in developing markets,” Munster told investors (via Fortune.)

In other words, rather than sell a cheap iPhone that erodes its profit margin, Apple opts to initially set a higher price that can be adjusted downward (always easier than trying the reverse) as time goes on.

  • Share:
  • Follow:
  • Africanking

    Even though my contract was up since this summer, i just don’t see the point of upgrading my iPhone 4S for something like 5s or 5c. I am pretty happy with my jailbroken iPhone.

    • DunedinEagle

      Totally disagree. I have a 4S and either one is a MAJOR upgrade. DO a side by side comparison there really is none.

      • rasengan720 .

        The 5c is a iPhone 5 with a plastic shell.. And the iPhone 5 isn’t a major upgrade from the 4s.. The a6 is pretty much a over clocked version of the a5 so you don’t really have to upgrade from a 4s to 5c but considering the touchid and saying that it’s 40% more processing speed and 56% graphical performance I’d say the 5s can be a decent upgrade from the 4s

      • iThinkergoiMac

        The 5s has 100% more CPU and GPU performance than the 5, which itself was decently faster than the 4S. Your numbers are actually not high enough.

        The 5s is a huge upgrade from the 4S, and I will be getting it once my contract is up in about 6 months.

      • DunedinEagle

        DO you have WiFi issues at home with your 4S? THe 2.4 antenna drives me bonkers. I moved my router and it seems better but I really want the better antenna.

      • iThinkergoiMac

        I have zero issues with WiFi at home on my 4S. But I have a small one-bedroom apartment, so my router gets everywhere really well.

        That being said, I generally don’t have WiFi issues anywhere with my 4S…

      • DunedinEagle

        Thanks! Mover router and it has helped.

      • Rowan09

        How is an upgrade from a 4S to 5c or especially a 5S not worth it. I have a 4/4S/5 and the 5 is significantly faster. As a phone tech it’s better to always just get the newer model and sell the old one it works out to run you the same upgrade price.

      • DunedinEagle

        I have until early January before I can upgrade. I can sell my 64 gig 4S for I think like $300? I would still have to shell out $550 for the phone (I need the 64 gigs). I have Verizon and am nervous about the other carriers as I’ve had both T Mobile and AT&T. I guess the advantage is I would be off contract and could upgrade when the 6 comes out right?

      • Rowan09

        Oh. I have AT&T now and the service is great, when the iPhone first came out in 07 they had a lot of dropped calls but I don’t have that issue anymore. The coverage area is also great, nevertheless Verizon has the best coverage and service but AT&T is just as good. T-mobile on the other hand has ways to go. Verizon is way too expensive for my taste and I like GSM phones.

      • mehrab

        Usinf the 4s to the 5 feels like using a toyota and then using a ferrari

      • DunedinEagle

        Whatever you need to do to talk yourself out of it but the fact is 4S to 5, 5C or 5S is a huge upgrade in so many many ways.

      • rasengan720 .

        i agree in the terms of jailbreak but as for the average stock iphone user i don’t see the need to upgrade.. (jus my opinion) I love jailbroken iphones so if i had the money i’d upgrade too.. but can’t :/

    • Rowan09

      I have the 5 and I really want to wait for the 6 but I might just sell my 5 and purchase the 5s with the money like I always do with previous models.

      • diggitydang

        I agree… If I buy the 5S and sell my used 5 (on Kijiji, not on those terrible trade-in sites), I end up spending about $300, taxes in. If I do it again when the 6 comes out, selling my 5S, I spend about the same. So to get to the 6, I ended up spending about $600, let’s say…

        Alternatively, I hold onto my current 5, and buy the 6 when it comes around next year, then sell my even older 5, and it ends up costing me about $500-$600 to go from the older 5 to the 6. I’m either on par with the first scenario, or spending about $100/iPhone launch to always have the latest. That’s not bad to me…

        That’s also not to mention when my contract expires and I buy it discounted and sell it at full price, making up all the $100 increments.

        Anyway, I’ve been doing that since the 3GS and I’m not broke yet!! Ha!! Then again, I didn’t do that great in math through school!!

      • Rowan09

        It wouldn’t make a difference because if you had an upgrade and bought a 32Gb your spending $299+ anyways so it’s like you are using an early upgrade option without actually needing to upgrade. I’m currently with AT&T with my contract being up next month so I’m going to AIO wireless which runs under AT&T for a fraction of the price. No more contracts for me.

  • Al

    The spotlight on Apple is fascinating.

    Whatever Apple doesn’t do… It gets criticized.
    Whatever Apple does do… It gets criticized.

    • Yunsar

      Except for fanboys!

    • Dan

      Hence why a lot of people miss Jobs

      • iThinkergoiMac

        Except this is no different than what happened when Jobs was around. Remember when the 4S was released? People said it was the most underwhelming release ever. Now the 5s is “the most underwhelming release ever” and it introduced more features than the 4S did. People want magic or Apple is doing a terrible job. This release was doomed to be viewed this way before it ever happened.

        I actually think it was a great release.

      • Dan

        Believe or not I was actually impressed with 4S, I wanted Siri so bad, I jailbroke my iphone 4 and paid for a proxy using Spire. I find that iPhone 5 and 5S simply failed to ‘wow’ me like previous versions did.

      • iThinkergoiMac

        I guess people are different, as I was more impressed with the 5s than the 4S. Interesting!

        FWIW, the interesting thing to me about the 5s is the 64-bit architecture, which is a huge difference moving forward. I also appreciated the Apple decided to properly improve the quality of the camera rather than stuff more pixels in.

      • Dan

        Yeah 64 bit architecture is a nice aspect, but I was talking to an engineer friend of mine, he finds the idea ludicrous as you need 4GB or RAM to properly take advante of the 64 bits. I guess we will see what they do with it.

      • mehrab

        Its a phone not a computer. What they will do is optimize it.

      • mehrab

        Watch the keynote maybe it might change ypur opinion but i HIGHLY doubt that.

      • iThinkergoiMac

        Yeah, on the RAM side, it doesn’t matter. However, the 64-bit architecture allows for bigger and more modern instruction sets. It’s likely required by the fingerprint sensor and I believe some of the new performance benefits of the GPU are because of the 64-bit architecture. RAM isn’t the only benefit of 64-bit.

      • mehrab

        That simple means nothing wows you in the apple world but everything in the android world woes you.

      • Dan

        I don’t think you can read. I said that I was wowed by iPhone 4 and 4S, not iPhone 5.

        Also I’m not really wowed by android, it’s just that you can do more with it. Right now I find IOS too restrictive.

      • mehrab

        My bad how do you find it restrictive? If its customization then ios 7 improves that and gives your iphone a good handle over its look and feel. Second. Ios 7 is far less restrictive. The more ypu can do with it is very useless as the more thing sarent implemented perfectly the core experience is far better on ios. The 5s has amazing soft ware hardware camera etc. Try it for a week your opinions will change

      • Dan

        I’m not knocking Apple, the experience is smooth. It’s alright for some people.

        I just find that android can do a lot more. To name a few: select default apps, file management, expandable memory, able to switch batteries, nfc, torrenting, themes…

        Just doesn’t cut it for me anymore. Maybe someday Apple will open up a bit and let us do what we want with the phone or some ‘killer’ feature will impress me, who knows. I just don’t find the changes as impressive as when Jobs was there (IOS 4 to 5 was amazing, then Siri was a really nice feature too, IOS 6 was boring imo).

      • mehrab

        Specific android,phones switch batteries do that. Other then that theese features are not are everyday neither is it a must have neither is it suitable for the average consumer. “File management and torrenting themes i mean” MAYBE USEFUL TO YOU THATS GOOD. the iphone is not made ouf of plastic and the design is very complicated so you wont see them ever giving you the ability to swap batteries even on the 5c. And ypu can always jailbrake for torrenting themes mods and file managements apps every ios is jailbroken and always pretty much will. Try the 5s borrow it feom sokeone for 2-3 days i guess the new hardware and software really
        changes things about the expirience

      • Dan

        I agree there are not for everyone. My wife for example does not care a lick about all of these features, so iPhone would be for her. Imo iPhone is for people who want a phone to work out of the box. I like to do more. If Apple comes out with a 5” screen, I’ll consider it since I always like the build quality.

  • Yunsar

    It’s so expensive in Australia. $739 is like 685 USD
    Edit: I checked the price in China. It is 4488 RMB which is 733 USD. what is the use of making it expensive in China?

    • Andy

      Hong Kong usually has the least expensive prices. Even China seems expensive in comparison.
      iPhone 5c starts at 4688 HKD (605 USD)
      iPhone 5s starts at 5588 HKD (721 USD)

      • Falk M.

        Aye. If you’re Chinese and live near HK and don’t get your tech in HK… I have bad news about your intelligence. :)

  • Ignacio Irigoyen

    Apple might be happy with this, as they where looking into re-buying they own stock.

  • Joshua Serna

    I don’t think its just wallstreet that was dissapointed. Im an apple fanboy basically and ive upgraded to every phone they have. This was apples most dissapointing announcment and they didnt back it up with any other product (macbook, ipad mini, etc…). Im no longer a business major but as a dissapointed fan i can’t help but feel as though there are a few thousand more of us. Why wouldnt the company pull out their really expensive stock on only a medicore release? Apple could see that plastic iphone 5 for cheaper.

    • Rowan09

      The iPad event is in October, this was an iPhone event.

    • DunedinEagle

      While I agree with you that it was underwhelming you have to consider all of the people around the globe who’s only mission is to leak info on the next iPhone. Obviously they are getting better and better at it as they pretty much nailed it in advance. If you had no idea about the finger print thing until Cook announced it wouldn’t you be more excited? I will admit there are very few bells and whistles this time around. They tried hard to overcome that in the Keynote.

  • http://www.ideaprison.com/ ideaprison

    Yes, the 5C should have been way more affordable since plastic = cheap (any way you look at it) Would have created an even bigger market for them if they did it right.

    • mehrab

      Its not ordinary plastic neither is it a mid range powerful phones this phone can beat the ga4 in gaming and various perofmance and camera tests while keeping very great battery

      • http://www.ideaprison.com/ ideaprison

        What’s a ga4? I wasn’t trolling, I’m just anti plastic or anything remotely plastic, they should have kept the 5 instead of this stupid 5C phone.

  • Amad

    I don’t see many people buying the 5c because with like £80 more you can buy the 5s. I think after christmas the 5c is going to be a lot cheaper.

  • DunedinEagle

    “Lost somewhere in the disappointment that the device labeled the iPhone 5c was not low-cost, was Apple’s announcement that the iPhone 4s was now free. Free probably qualifies as low-cost, the only difference is the name of the device. Analysts wanted the cheap iPhone to be the iPhone 5c, not the iPhone 4s.”

    DO you think consumers are stupid enough to believe that? The 4S is far inferior to the 5 for numerous reasons. The crappy WiFi antenna being the best example not to mention the screen size. Perhaps the analysts are aware of this too? And why not mention the price of a 4S with no contract?

  • Umut Bilgiç

    I dont think it is Apple’s fault mostly. We were the ones that expected the new iphone 5c to be cheap. And bloggers/news reportsman were the ones who made us believe in such idea. Apple dodnt even say anything about a lower-cost iphone. We were the ones who created the thing, and we are the ones bitching about it.

    • mehrab

      The 5c has the powerful to take and gs4″s and htc ones and defeat them. Thats what people dont get. And it was meant to be sold on carriers

  • Rowan09

    No surprise here, it goes to show the market is all controlled and has little to do with actually making money. If they made the 5c $249-$400 like I thought they would they would have shot up to $700 again.

  • pauleebe

    I would argue that the fear lies more within the fact that Apple seems to have insufficient supply of 5S’ to meet the demand on launch day. This lack of supply may lead to a poor Holiday quarter, and worse earnings.

  • Well_Said

    The criticism shouldn’t come as a surprise.

  • Hansana Weerasooriya

    Might as well pay the extra $100 and get the S

  • Ishaan Malhotra

    $549 for that? I’d rather buy an iPhone 5 from some unofficial source.

  • http://iostv.com/ iOS TV

    Yesterdays 5% drop was more about the lack of China Mobile deal than the pricing of the iPhone 5c. The China Mobile announcement was widely expected at the Beijing event. WallStreet knew about the 5c pricing on Tuesday during trading hours and was only down 1%.

    Analyst lowered estimates on Wed. mainly due to the fact the iPhone won’t be available for China Mobile until at least Nov., thus impacting estimates. The higher price of the 5c did have an impact on the stock price, but the lack of China Mobile deal had a greater impact.

    The 5c does not appeal to me and I think it should be priced under $500, but I also thought the iPad mini should have been priced at $299. The iPad mini has sold very well at $329. I think from a business stand point we have to give Apple some credit and trust that they are the best at determining what the prices should be.

  • qosmio

    “Low end”? If the iPhone 5c is low end! What are they calling the crap samsung chucks out… At the end of the day the 5c is just an iPhone 5… Was that called low end! They are all pissed because the roomer mill ” media” got it wrong! Guessing apple would even bother trying to put out some cheap crap.

  • zustroy

    They deserve this big time! Stop making fools of customers, Apple!

  • CryptoCoin420

    I thought the 5c was supposed to be a budget, iPhone? Get less features for only 100 ish less than the 5s? Wtf Apple. Not that I need a budget iPhone (and would not get one) but this is dumb and a waste of time and effort from your company.

    • iThinkergoiMac

      Amusingly, if Apple had not released the 5c I doubt you’d be complaining about the 5 being exactly where the 5c is. Considering the 5c has the exact same capabilities and the exact same price, I’m not sure what you’re complaining about.

      The only thing that said Apple was “supposed” to come out with a budget iPhone was the rumor mill. They’re just rumors, anyone building actual expectations on them is setting themselves up for disappointment.

  • itaydrum

    Don’t understand if they kill the 4s they would kill the 3.5 ” screen and the old connector with one stroke! and then stay with iPhone 5C – 5 – 5S (450-550-650$ relative) ALL 4″ display and ALL lightning. Really stupid to leave the 4s

  • Gus Me

    One can only hope that it continues like this, and that the masses don’t buy into the 5c. I feel this is the only way we’ll get what we want and not what Apple says we want. (I highly doubt it’ll happen though…)