Apple Inc.'s New iPhones Have Arrived, Now What? Four Investing Experts Respond
Yesterday, several months of frenzied speculation and Internet
rumors came to an end.
) introduced its newest two iPhones, the plastic iPhone 5C, which
will replace the iPhone 5, and the higher-end iPhone 5S.
Many bloggers and analysts had predicted that a budget iPhone simply wouldn't happen, or else argued against the logic of Cupertino taking that route. But the iPhone 5C is better described as a cheaper -- rather than budget -- iPhone; the device, which comes in yellow, blue, white, and red, will be available with a two-year contract for $99 (16GB) or $199 (32GB), or unlocked for $550 (16GB) or $650 (32GB). On the Apple Store's Chinese website, the 5C is listed at RMB 4488, which equals $733 USD. That's certainly not a budget iPhone targeted at emerging markets, as early rumors had been suggesting.
The 5S, which Apple is calling its "most forward-thinking phone yet," will feature a fingerprint scanner in the home button for added security and convenience. Moreover, it will boast an 8-megapixel camera and brand new A7 chip, which makes the phone the first ever to have a 64-bit desktop-class chip architecture. That means the phone is going to be very, very fast. Available in the much-rumored gold finish, as well as silver and "space gray," the 5S will be sold with a two-year contract for $199 (16GB), $299 (32GB), and $399 (64GB). Unlocked, the device will be sold for $649, $749, and $849, respectively.
Following up on our story yesterday that previewed the event , four of Minyanville's finest tech-investing experts give their insights on what to make of the new iPhones and Apple stock.
Solid, but Missing the Sizzle Factor
By Michael Comeau
I am very excited about upgrading to the iPhone 5S, specifically for the enhanced camera. I was also impressed with the practicality of the new feature additions like the touch fingerprint ID scanner, and I like the look of iOS7 as a whole.
However, I'm not convinced it's going to excite the masses in any big way as there just wasn't the sizzle factor of something like Facetime. The 5S should sell well, but I just don't see it as a pure game-changer the way something like the iPhone 4 was.
Overall, I'd rate the event a B.
Michael Comeau edits Minyanville's Buzz & Banter and is also a regular columnist on Minyanville.com, focusing on technology and consumer stocks. Read more of his work for Minyanville, here .
Michael Comeau has a position in AAPL.
(See also: Apple's Most Boring iPhone Event Ever . )
Fingerprint Tech Is a New Killer App
By Sean Udall
To me, there was really only one surprise: the fact that the iPhone 5C is a global phone and effectively replaces the iPhone 5. I had thought this was going to be an emerging market phone only.
Oddly, the 5C phone isn't a much cheaper device, though I was never in the camp that believed Apple would be making phones in the $300 to $350 price range with no subsidy. But the phone is still about $100 more than I thought it was going to be. Everything else in the announcement was incredibly well-telegraphed from all the information we have received in recent weeks and from all the supply chain leaks.
In my mind, these are the key takeaways and lingering questions stemming from yesterday's event:
- Does the higher-than-expected price of the 5C imply that China subsidies will actually be more in line with those of the US and other developed markets? It seems that way, unless there is a wholly new "surprise" device that we haven't seen yet.
- iPhone 5C margins look to me to be higher than the current iPhone 5 margins, due to the cheaper materials used in construction.
- I think the fingerprint tech is a new killer app for Apple and a truly new innovation.
- I think this sets up a whole new and ripe monetization stream for Apple -- mobile payments.
- As I've said before, iOS7 will be very well received and is a huge improvement.
- And iRadio is likely going to be a monster product as well.
Sean Udall is an investment strategist, portfolio manager, and proprietary trader with extensive experience across a wide variety of asset classes, including equities, fixed income, currencies, and derivatives. He's a recognized trader, prolific writer, and the founder of the TechStrat Report , a technology-focused investment newsletter from Minyanville. Read more of Sean's commentary, here .
Apple May Be Missing an Opportunity Down the Food Chain
By Justin Sharon
Do you remember the 21st night of September?
Love was changing the mind of pretenders
While chasing the clouds away.
Not only did that siren song of the '70s from Earth, Wind & Fire make an apparently eerily clairvoyant mention of cloud computing, the date referenced in the ditty is a dagger to the heart of Apple Inc. ( AAPL ) investors everywhere. September 21 last year was indeed when the stock hit an all-time high of $705.07, with any pretenders to Apple's crown conspicuously absent. That its shares closed at a mere $494.64 following Tuesday's much-trumpeted iPhone announcement, even as the S&P 500 Index (INDEXSP:.INX) has soared in the interim 12 months, is indicative of how far the firm has fallen from favor.
Can these new offerings give the company back its mojo in the face of fierce competition from Samsung's (OTCMKTS:SSNLF) bigger-sized screens and Google's ( GOOG ) Android operating system? Certainly, there are some compelling features. The iPhone 5S boasts a better battery life, vastly improved flash camera, and more powerful 64-bit processor. Above all, its embedded fingerprint scanner is generating buzz, and noted bull Brian White, Cantor Fitzgerald's analyst who last week assigned a $777 price objective on the equity, promptly told CNBC that this more expensive offering will be a "big hit."
Yet an equally big opportunity may have been missed further down the food chain with the lower-end 5C. "Think different" is spectacularly bad English, but it has historically been a money-making mantra for Apple. Here, however, one is struck by how little the phone's cost deviates from prior pricing strategies. Absent a considerable carrier subsidy, which Apple has always tended to shun, the device remains out of reach for untold millions of potential customers in China and India, where the likes of Vodafone ( VOD ) already enjoy a considerable head start. The ongoing absence of a larger screen only adds to the sense of disappointment.
The question of "WWJD?" (What Would Jobs Do?) has been one of Silicon Valley's most popular parlor games this week. Apple's legendary CEO famously favored quality over quantity, so a plethora of plastic products, however colorful (see image), likely wouldn't have been to his taste. He was, however, also an arch pragmatist not above accepting a financial lifeline from lifelong nemesis Bill Gates, so trying to decipher the intentions of an always-mercurial man is ultimately a fool's errand.
Oh, "One more thing," as Steve so liked to say. Shares tumbled after Tuesday's announcement, and opened sharply lower today after a trio of equity analysts rushed to reduce their ratings. Yet Beijing's year of the snake may yet have a twist in the tale. Reports indicate that an agreement with China Mobile ( CHL ) is imminent. Apple has always laughed in the face of those who make snap judgments, so how this story ends is still untold.
Justin Sharon authors Minyanville's stock upgrades and downgrades articles every morning. He has extensive experience on Wall Street, most recently at the Private Client unit of Merrill Lynch. A 12-year spell in its research department encompassed the eras of Blodget, boom, bust, and Bank of America. Read more of his work for Minyanville, here .
Apple Is Still Apple
By AndrÃ© Mouton
I liked Apple's presentation, even if the market didn't. It was a relief to see the unlocked iPhone 5C priced at $549, where it won't cannibalize the high-end model. This won't do much to help Apple's market share, but I'd rather see healthy margins than a race to commoditize. Apple is still Apple -- and that's a good thing.
The feature upgrades on the iPhone 5S are a mixed bag. The 64-bit processor seems like overkill for a 4-inch handset, although it bodes well for the iPad. The camera improvements are nice, but they would have benefited from an increase in disk space. The fingerprint scanner could be a big deal if it cuts down on theft, or gives a boost to personalized services like mobile payment (although this wasn't mentioned in the presentation). All in all, it wasn't an earthshaking update, but this reflects a maturing industry more than any lack of innovation from Apple. The iPhone is still best in breed, and I would expect solid sales of the new model -- though perhaps not much growth.
If I have a complaint, it's Apple's decision to continue selling the iPhone 4S. The choice of plastic for the 5C is understandable, but it still feels like a downgrade. Consumers may choose to save $100 and go with the 2011 model; it offers brushed metal and a more professional look. Regardless, there's an aesthetic awkwardness to the new lineup that's a little unusual to see coming out of Cupertino.
AndrÃ© Mouton is an independent investor who cut his teeth in the dot-com crash and chewed his lip in the financial crisis. He is a former writer for Offbeat Magazine in New Orleans and a touring (but not itinerant) musician, who now lives in New York. Read more of his work for Minyanville here .
Follow Josh Wolonick on Twitter: @JoshWolonick and @Minyanville