Will Apple sell a low-end iPhone?
The tech giant may announce a lower end smartphone later this year, says one Wall Street analyst.
Apple (AAPL) investors, fanboys, and zealots: Be prepared for a low-end iPhone. At least that is what one analyst thinks.
Credit Suisse analyst Kulbinder Garcha believes Apple is getting ready to announce a lower-end iPhone for a few reasons.
He believes Apple will not only update the iPhone 5 later this year (see TheStreet), but Apple will also announce a low-end iPhone, which will not only help Apple increase its market share but profit share as well. Garcha, who recently cut his earnings estimates (TheStreet), rates Apple "outperform" with a $600 price target.
There's been much speculation not only from Wall Street, but the media as well about Apple and a lower-end iPhone. There's concern that it would dilute Apple's brand, but CEO Tim Cook tried to assuage these concerns, saying Apple would never release a bad product.
"The only thing we'll never do is make a crappy product," Cook said at a Goldman Sachs conference in February. "We're going to make a great product. And so that's the only religion that we have is we must do something great, something bold, something ambitious."
Even if Apple does make a lower-end iPhone, it would not be that dilutive to the brand, Garcha notes, and could have higher margins than people think. He pegs the price of a lower-end iPhone at $329, with 38% gross margins. That's lower than the gross margins Apple gets on the current version of the iPhone, but it would be in line with Apple's margins overall.
A lower-end iPhone would not just be good for market share, but could provide as much as $21 billion in revenue and $5 per share in earnings by 2015. "Assuming Apple introduces a $329 iPhone in 2014 and starts to gain share in these lower price bands, we believe it could capture 40% share in the $300-$400 market," Garcha notes.
Shares of Apple were lower in early morning trading, down 0.73% to $451.18.
More from TheStreet.com
Copyright © 2014 Microsoft. All rights reserved.
VIDEO ON MSN MONEY
Top Stocks provides analysis about the most noteworthy stocks in the market each day, combining some of the best content from around the MSN Money site and the rest of the Web.
Contributors include professional investors and journalists affiliated with MSN Money.
Follow us on Twitter @topstocksmsn.