How Much Will The iPhone 6 Cost?

Two years ago, Apple AAPL had a bit of a conundrum. The company wanted to release a smaller tablet, but the current release schedule (a new tablet every spring) presented a problem. Should Apple jump the gun and release the fourth-generation iPad alongside the iPad Mini, or separate their releases and cannibalize sales of future devices? Apple ultimately chose to release the iPad 4 and iPad Mini simultaneously. There was another problem, however: how much should Apple charge for its smallest tablet? At the time, the newest iPod Touch retailed for $299 (for the 32GB iteration) or $399 (for the 64GB model). If Apple charged less for the iPad Mini, it would undercut the iPod Touch. If the price was the same, it could still diminish the value of the iPod Touch. At launch, the first-generation iPad Mini started at $329, though the second-generation model (which features a Retina Display) sold for $399 -- just $100 less than the iPad Air. Now that Apple is ready to expand its iPhone lineup, the company faces a similar crop of issues. The price of its next iPhone might be the most important issue of all.

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Mystery? What Mystery!?

Sean Udall, the CIO of Quantum Trading Strategies and author of The TechStrat Report, told Benzinga that he doesn't think that the iPhone 6's price is much of a mystery. "I think the game plan has already been set up," said Udall. "Every time Apple comes out with a new device, it's the high-priced device. Whatever their old high price is -- let's use that for the benchmark -- that's going to be the price for their 4.7-inch screen." Udall expects Apple to repeat history and discontinue its oldest remaining smartphone (in this case, the iPhone 4S). "Then the 5S becomes the mid-tier product," he added. "I guess it would replace the 5C because the 5S gets a $100 price chop. Then the 5C probably becomes the low-end device." Udall said that the only mystery is how much Apple will charge for the 5.5-inch model. "My guess is they're probably gonna price up the largest screen," he said. "The speculation is that they're gonna charge $100 more. I don't think that phone costs anywhere close to $100 more to build. It's just a slightly bigger screen. What's the bill of materials? A slightly bigger screen is what, $5 more?" If the 5.5-inch model contains a better processor than the other models, offers more memory, and other additional features, Udall said that would change everything. "If they juice it up with a lot of [additional features], it'll be easy to mark it up $100 more," he said. "It might only be $50 more. It all depends on how they configure it."

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The Price Could Be Even Lower

Global Equities Research analyst Trip Chowdhry told Benzinga that Apple will have to be "very price-competitive to Android, even if that means cannibalization" at the low end of the market. "I don't think there's any way out of it for Apple," he said. "They can't avoid it. The only thing they can hope is that the demand is very, very strong across the board -- the features are compelling, the phone is compelling, so that even if they price it low, the volume overcomes the price so that the net revenues are high." Chowdhry predicted that the iPhone 6 will sell for the same price as the iPhone 5S, but he said it could be even cheaper. "I don't think they have the capacity to increase the price," he said, adding that if Apple was prudent it would charge no more than $199 for the 5.5-inch model. "The reason I say that is, they will make more money on app sales," said Chowdhry. "If they increase the price initially, they won't have the volume." Disclosure: At the time of this writing, Louis Bedigian had no position in the equities mentioned in this report.