Apple (AAPL) might increase prices on high-end iPhones and use that excess pricing to subsidize lower-cost iPhones to attract new users into the Apple ecosystem, a Wall Street analyst said Monday. Apple stock jumped after the report.
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Needham analyst Laura Martin said the pricing strategy speculation is based on her conversations with several former Apple employees.
In a client note, she cited two reasons for the iPhone pricing move. First, high-end smartphone customers are typically less price sensitive. Second, Apple needs to reach a new base of consumers to grow its installed base of users.
Martin reiterated her buy rating on Apple stock with a price target of 220.
Apple Stock Advances
On the stock market today, Apple stock rose 2.9% to close at 216.75. On June 11, Apple stock broke out of a cup base at a buy point of 199.62, according to IBD MarketSurge charts.
Meanwhile, a major challenge for Apple and its competitors is that fact that consumers are holding on to their handsets for longer periods between replacements.
"The smartphone replacement cycle is now closer to 36-40 months, up from about 24-30 months pre-Covid," Martin said. Reasons include pressure on consumer spending and a lack of innovation in smartphones, Martin said.
Apple is hoping to boost handset sales by touting artificial intelligence features, starting with the iPhone 16 series this fall.
IPhone Losing Share In China
Elsewhere on Wall Street, UBS analyst David Vogt kept his neutral rating on Apple stock with a price target of 190.
In a note to clients, Vogt said Apple's iPhone business lost market share in China in May despite discounting. IPhone sales also declined in the U.S. and India, though they rose in Europe.
Apple's iPhone sales in China declined 2% year over year in May, marking its fifth consecutive month of decline. It lost share to domestic rivals led by Huawei, Vogt said.
Apple stock has an IBD Composite Rating of 89 out of 99, according to IBD Stock Checkup.
Follow Patrick Seitz on X, formerly Twitter, at @IBD_PSeitz for more stories on consumer technology, software and semiconductor stocks.
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