Is the IPhone SE Bad News for Apple Investors?

Apple (AAPL) has been a range bound stock for quite some time now. Despite reporting billions in earnings every quarter, Apple is trading about 10% lower from its all-time highs. That may soon change due to the arrival of the iPhone SE.

Over the past few years, Apple has been upgrading its iPhone’s screen size, starting from iPhone 3 to iPhone 6s. But recently, the company has launched a new iPhone SE with 4-inch display since 2013. This new iPhone has almost same features and similar performance as that of iPhone 6s, excluding the company’s new 3D touch technology.
Apple’s iPhone SE is available in the market for $399, and is much cheaper as compared to $649 iPhone 6s.

The iPhone SE is the lowest priced iPhone that the company has ever introduced. It is also the first time when Apple has introduced a new, cheaper model in between the launches of flagship iPhones.

After the launch of iPhone 6 and iPhone 6 Plus, its 4-inch iPhone models have reached at the bottom position in its product portfolio, aiming the mid-range market. At its iPhone SE launch occasion, the company reported that it sold around 30 million 4-inch iPhones in the past year. The company still achieved a superior sales result from 4-inch model, even though its iPhone 5S was older more than one year at the starting of 2015.

Keeping in mind iPhone 6’s sales performance in 2015, the company believes that introducing a new 4-inch model with all the latest features will spur upgrades among iPhone lovers who choose to have a smaller model, while also surging the company’s market share among cost sensitive smartphones consumers.

In the case of iPhone SE, it is unlikely to see a tidal wave of early sales. But there is definitely a need of iPhone 5 or iPhone 5S users who have been waiting for a new 4-inch model to upgrade. At present, iPhone SE are not being aggressively sold, as only some of the outlets were completely sold out.

Bearing in mind that the iPhone SE should be comparatively easy to manufacture, production restrictions should not be a main factor limiting supply. However, it would put forward that the demand is quite strong, if the lead times decreases to 24 hours instead of couple of weeks.

Conclusion

The concerns that iPhone SE will cannibalize the sales of the iPhone 7 is preposterous. Apple is targeting a whole different base of consumers with the iPhone SE and it won’t have a negative impact on iPhone 7 sales. Although it may reduce Apple’s gross margin, but it should lead to improved profits, which is all that matters. So, the iPhone SE may not be a masterstroke, but it should get the stock moving higher.
Published on Apr 7, 2016
By Akshansh Gandhi

Copyrighted 2016. Content published with author's permission.

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