There are plenty of reasons to be enthusiastic about Apple’s massive earnings call yesterday. One analyst who’s not happy, however, is Barclays analyst Tim Long. In a note to clients, Long writes that Apple average selling price for iPhones may be slipping.
Apple stopped reporting unit sales for the iPhone last year. Instead, it focused on ramping up the average price it sells each iPhone for. Perhaps not enough, though.
“iPhone revenues were in-line, but we believe ASPs [average selling prices] were weaker,” Long writes. Long thinks that the average selling price of the iPhone will drop 10% year-over-year in the final three months of 2019. Overall, the firm thinks there will be a 12% ASP decline in 2019 as a whole. Next year, there could be a further 6.5% decline.
The decline is the result of Apple lowering the price for the iPhone. The iPhone 11 starts at $699, which is $50 cheaper than last year’s iPhone XR. Part of the reason for lowering prices is to grow the number of customers who will sign up to Apple’s services business.
While Long was originally supportive of Apple’s strategy, he didn’t realize how low ASP would get. He also thinks it could hurt Apple as next year’s 5G iPhones get closer. Lots of analysts are excited about what the first 5G iPhones will do business-wise. Long thinks that Apple may struggle to charge enough without hurting demand. Especially after lowering prices last year.
Currently AAPL is trading at $246.78. This gives Apple an approximate market cap of $1.116 trillion.