Apple Inc. (AAPL)’s Low-Cost iPhone Market Opportunity

A Foolish opinion
Munster’s expectation that Apple will launch the device at a $199 price point seems too aggressive, considering Apple’s historical pricing strategies. Apple has always maintained premium price points, even when it moves downmarket, and I think a price point closer to $250 to $300 makes more sense in order to preserve margins and the premium branding.

An affordable iPhone would still carry lower gross margins relative to the flagship model, but considering the sheer size of the market opportunity we’re talking about, Apple will make up for margin contraction with unit sales growth that should significantly boost gross profits in dollar terms.

At the recent Goldman Sachs Group, Inc. (NYSE:GS) conference, Tim Cook reiterated his belief that eventually all phones will be smartphones, and that represents incredible opportunities for Apple. The implication there is that in order for Apple to truly tap its full potential in the booming smartphone market, it will need to eventually broaden the segments it addresses — and Tim Cook knows that.

The article Apple’s Low-Cost iPhone Market Opportunity originally appeared on Fool.com and is written by Evan Niu, CFA.

Fool contributor Evan Niu, CFA, owns shares of Apple. The Motley Fool recommends Apple and Goldman Sachs. The Motley Fool owns shares of Apple.

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