These 2 Firms Say iPhone SE And iPad Pro Won't Drive Significant Sales

At a time when the Street is expecting a low-cost iPhone SE could drive Apple Inc. AAPL sales, these two firms think otherwise.

Deutsche Bank

Deutsche Bank's Sherri Scribner said, "Without any new features or functionality versus the iPhone 6s, and with the same form factor as the iPhone 5s, we do not expect the SE to be a significant refresh driver or to be additive to Apple's installed base."

Scribner, who maintains a Hold on Apple shares, said although the new iPhone SE is priced "at a healthy discount to Apple's current $691 ASP, it is still approximately $100 above the estimated global smartphone ASP, and well above the ASP in key emerging growth markets like India and China."

Related Link: 150 Million New iPhone Users In 3 Years? Goldman Says SE Should Help Apple Expand In Emerging Markets

Scribner noted that other Apple products were also "relatively in line with refresh expectations." The analyst explicated, "Given slowing smartphone market growth, Apple's high price points, and elongating refresh cycles on smartphones, tablets and PCs, we see limited near-term catalysts for the shares.

Pacific Crest

Meanwhile, Andy Hargreaves of Pacific Crest noted that he doesn't believe the unveiled products are likely to be catalysts to sales trend changes for Apple's key product categories.

"We continue to anticipate growth in the iPhone7 cycle, which supports our Overweight rating," Hargreaves wrote in a note to clients.

According to the note, the SE reveal was "almost entirely as expected" for the form factor and features. "The biggest surprise was a $50 reduction to the entry-level price to $399 versus the iPhone 5s at $449," Hargreaves stated.

"We do not believe the market is meaningfully elastic at these price points, so the price reduction is not likely to drive a significant increase in volume. We believe the key for the iPhone SE is that it will allow Apple to maintain differentiation by screen size throughout the product lineup following the launch of iPhone 7," Hargreaves noted.

The differentiation should help avoid "trade-down activity" between now and the next iPhone cycle, "which would have been a more significant risk had Apple pursued its traditional waterfall strategy and moved the iPhone 6 to the low-end price point," the analyst added.

Being similar to the iPhone 6s/6s+, the SE should be capable of sharing component production costs, driven particularly by higher volume 6s/6s+ models through the iPhone 7 cycle, "which is likely to have cost of goods sold benefits that help offset the gross-margin impact from the reduced retail price."

"Our estimates contemplated declining prices for Apple's low-end iPhone SKUs. While the change is larger than we anticipated, the impact to total profitability is likely to be moderate in part because of the relatively low volume of Apple's low-end iPhone SKUs, and the potential for moderate elasticity and cost savings from moving to higher-volume components," Hargreaves added.

On the new 9.7" iPad Pro, the analyst said the messaging was changed a bit in order to target PC replacements. "This likely reflects the saturated nature of the high-end consumer tablet market, which leaves Apple little choice but to more aggressively pursue PC replacements to try to find growth."

"Despite the change in tone, we believe use cases for PCs and tablets remain distinct for most people. Consequently, we do not expect the new messaging to drive a significant shift in the iPad sales trajectory," Hargreaves noted.

Hargreaves has a price target of $127, while Apple shares breached the $105 price target of Scribner and closed Monday's trading at $105.91.

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