BofA: Should Apple Cut iPhone Prices This Year?

With Apple Inc. AAPL reporting a 1-percent drop in iPhone shipments in February, one Wall Street analyst asked whether the solution is lower prices. 

The Analyst

Bank of America analyst Wamsi Mohan reiterated a Buy rating on Apple with a $220 price target.

The Thesis

The three new iPhones that Apple reportedly plans to launch in 2018 give the company plenty of pricing flexibility, Mohan said in  a Friday note.

Apple is reportedly planning a larger version of the iPhone X with a 6.5-inch OLED screen, a 5.8-inch OLED iPhone X successor and an LCD screen phone this year. The price of the “iPhone X Plus” model will likely range between $1,149 and $1,199, Mohan said. Apple will likely drop the price of the “iPhone XS” model by up to $100 in an attempt to fill in pricing gaps in the high-end phone spectrum, the analyst said. Apple could also choose to target the $300-to-$499 price range with an updated SE model.

Apple investors shouldn’t worry too much about any lower-priced models cannibalizing premium sales, Mohan said. 

“While one can argue that availability of ‘good enough’ iPhones at lower price points can cannibalize sales of high-end phones, purchasing behavior has driven continued strength at the high end of the portfolio, which is driving share growth in the $600-plus category." 

Price Action

The market certainly doesn’t seem too concerned with disappointing iPhone X sales. Apple stock is up another 4.1 percent so far in 2018.

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Photo courtesy of Apple.