Will the average price of Apple’s iPhone exceed $900? AAPL’s stock price does not yet reflect higher sales of higher-margin models

iPhone 14 Pro sales are expected to be very strong. Photo: Getty

Apple (AAPL) is expected to break its iPhone average price record twice in the next few months as customers opt to purchase more expensive iPhone 14 “Pro” models.

A recent report in the FT, pointed to estimates by data provider Counterpoint Research that the average selling price (ASP) is likely to hit a record high of $892 in the September quarter and $944 in December.

Price projections are based on consumer demand, market information and supplier feedback. iPhone ASP is a typical measure used by the US stock market for Apple, since smartphone sales still account for around 50% of the group’s revenue. In theory, consumer preference for more expensive Pro phone models should have a positive impact on Apple’s margins.

So far, Apple’s stock price has yet to reflect the surge in sales of higher-margin models. In January 2022, the stock hit a yearly high of just over $182 and is now hovering around the $150 level and actually fell at the end of trading last week – despite bullish market forecasts. 14 Pro.

The resurgence in selling could send stocks higher again – after all, this is just the beginning.

Apple has just started manufacturing its new iPhone 14 in India – ahead of schedule. The company is operational in assembling the latest iPhones in Chennai. Apple, which traditionally produces most of its iPhones in China, is aware of the obstacles Xi Jinping’s government could create in its clashes with the US government.

The offer therefore seems positive and dDemand for iPhone 14 Pro certainly seems strong. However, it’s hard to understand in a time of belt-tightening why customers might opt ​​for the more expensive models? Is this area somehow immune to the cost of living crisis?

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The tempting apple

Jason Hollands, managing director of Best Invest, believes a combination of a “must have” factor and global variances in spending pressure is positive for Apple.

“I think for many young consumers, their mobile phone has become such an integral part of their lives that they now see it more as a staple rather than a discretionary item. A better model with a bigger screen, a better device photo is obviously worth paying more for”.

He adds: “And let’s not forget that while there is a lot of belt-tightening in the UK and Europe due to high energy prices, in the key US market for iPhone retail sales have actually held up well against the backdrop of overall growth and rising borrowing costs.

“Gasoline prices in the United States have fallen significantly in recent months, which for the American consumer will reinforce the impression that inflation has peaked.”

Steve Clayton, fund manager at HL Select, takes a similar line. “Many would expect quite the opposite when the pressures on consumer incomes are so great. But for many people, their iPhone will be one of their most prized possessions, and the new model’s distinctive design makes it an easily recognizable status symbol. Reviews have been positive, with many directing consumers to the more expensive Pro models.

Clayton suggests that for some time now we’ve seen a trend towards mid-market tightening across the consumer space and Apple has been playing that trend expertly for some time. He insists that people either want the lowest price or the highest perceived quality. And the shift from day-to-day spending to the old frees up money to indulge in luxuries for special purchases.

Apple is increasingly catering to the higher end of the market, with all of its lines carrying a premium. As long as it can show peak performance and the Apple logo continues to echo desirability, it can continue.”

Clayton adds, “One need only look at the performance of luxury brand owners like LVMH (LVMH) versus mid-market players like M&S to see the merits of the strategy. Had you invested £1,000 in both at the turn of the century? , by reinvesting dividends along the way, M&S (MKS) would have turned your £1,000 into £900. LVMH would however have multiplied it by more than ten.

“For Apple investors, the results have been even more dramatic. $1,000 invested in Apple at the same time would now be worth $190,000, while former rival Nokia (NOKIA), which took a more mainstream approach, is now a mere shadow of itself.

Simply Wall St currently views Apple as below fair value – with fair value hovering around the $160.37 level.

Marketbeat is also positive on Apple. Of 30 analysts, 23 rate Apple as a “buy” or a “strong buy”; 5 rate the stock as a “stock” and only 2 rate it as a “sell”.

Marketbeat’s consensus price quote is $181.90.

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Karen J. Nelson