Did Apple Just Price Itself Out Of The Market? (AAPL)

From Bill Hall: Last week, I explained how Apple (AAPL) is perfectly positioned and primed to profit from its new iPhone trio: the 8, 8 Plus and X models.

But over the last week, I’ve received tons of reader comments about the iPhone X’s unprecedented starting price at $999. Loads of readers want to know whether Apple has priced itself out of the smartphone market with its newest product lineup.

So this week, we’re going to take a closer look at the new iPhones, especially the iPhone X. Will the X be the monster that Apple hopes? Or, will it be a massive flop?

Read on and I’ll let you know what I recommend that my Safe Money Report members should do with their Apple holdings.

First off, here’s a graphic that shows how the iPhone’s price has developed since its first release about 10 years ago.

Click image for larger view

Apple’s forthcoming top-of-the-food-chain iPhone X features a colorful OLED display with more than 2 million pixels. What does that mean? For starters, that gives buyers sharper text for reading, more-impressive video playback and more. Better yet, it has a screen that runs from edge to edge, so you get a bigger viewing area without having to carry a larger phone.

Our Cupertino, Calif., friends have also taken the Touch ID technology to a new level. But rather than training your brand-new iPhone to recognize your fingerprint and/or thumbprint, you can register your face with the iPhone X so that it automatically unlocks when you look at it.

Apple calls it Face ID. But we’ve seen this kind of innovation before in phones such as the Galaxy S8. But Apple says its face-unlock uses 3-D imagery that’s even more secure. It says the new technology can’t be fooled even by a mask made by a Hollywood professional. And they say the face scanner’s more secure than fingerprint locks.

But if you don’t want to wait for Oct. 27, the first available date to order the iPhone X, the iPhone 8 and 8 Plus still have plenty to offer in the meantime. (Even better, those start shipping today.)

The iPhone 8 and 8 Plus feature what Apple has billed as a new design, with glass on the front and back as well as louder speakers, faster processors and upgraded cameras.

All three devices offer wireless-charging and new gyroscopes and accelerometers to improve augmented-reality experiences.

But does the regular fall release of a new iPhone suite guarantee an instant wave of profits for the company, like we’ve seen happen during the past decade?

Apple is trying to thread a needle with more new phones and multiple release dates.

The company wants to generate buzz and sales with the iPhone X, which will cost from $999 to $1,149. And it hopes this buzz will get many people to buy the upgraded iPhone 8, which starts at $699, or the iPhone 8 Plus, which starts at $799.

Unveiling three phones — the first time Apple has done so — brings risks.

There’s a couple of ways this marketing plan could go for Apple:

  1. Consumers see the phones as way too expensive, and the plan completely flops. Sure, some people will be crazy enough to drop about $1,000 or more on a new iPhone. After all, it’s the 10th anniversary and they just need to have the latest and greatest technology. But there won’t be enough market share for a viable product.
  1. Or, buyers will consider the phones such an upgrade over the other iPhones that they’ll be chomping at the bit to find one.

Here’s what some Wall Street analysts are saying:

“The high-end Chinese phone market is super competitive and customers are very discerning but also enthusiastic. If Apple can get something that rings the bell [with them], then this will work,” says Benedict Evans, a partner at Andreessen Horowitz, a venture-capital firm.

“This year’s event marked one of the most highly anticipated product announcements in recent years, and from a product perspective, the company did not disappoint… Fundamentally, we think the excitement surrounding the new form factor/features will drive increased unit demand in addition to mix shift toward the higher-end device ($999), which should enable one of the strongest iPhone cycles in recent years,” reports RBC Capital Markets’ Amit Daryanani.

“Starting in late 2017, we see an iPhone super cycle driven by accelerating upgrades due to new augmented-reality applications, better battery life and new form factors. Revenue grows 27% in FY18 driven by 40% iPhone revenue growth (23% unit growth) and 20% Services growth,” Katy Huberty, Morgan Stanley.

The graph below reports the consensus Wall Street expectation for Apple’s stock price.

Click image for larger view

As you can see, the current price is well below target.

But, Wall Street is known for being overly enthusiastic. That’s why I rely on my own research and well-regarded buy-side money managers when I make my buy or sell decisions.

And as I explained last week, I believe Warren Buffett said it best when he said:

“People want the product. They don’t want the cheapest product. Apple strikes me as having quite a sticky product, and an enormously useful product to people that use it. The degree to which people’s lives center around the product is huge.”

And this time I am sticking with Warren, as Apple remains a high-conviction holding in the Safe Money portfolio. In fact, I believe Apple’s stock price could explode upward and blow through the Wall Street analysts’ consensus.

That’s because, as I’ve explained previously, I believe the sky’s the limit for a group of carefully selected growth stocks in the current environment of high central bank intervention and low interest rates.

Indeed, in the Safe Money Report, I am in the process of expanding my favorite picks from the Dependable Dozen to the Sweet Sixteen. And Apple is one of the sweetest of the 16.

To get the inside track on the other core holdings and to receive the bonus selections in the Profit Accelerator portion of the portfolio, subscribe today.

Apple Inc. (AAPL) fell $0.96 (-0.63%) in premarket trading Monday. Year-to-date, AAPL has gained 32.77%, versus a 12.62% rise in the benchmark S&P 500 index during the same period.

This article is brought to you courtesy of Money And Markets.