According to Piper Jaffray analyst Gene Munster, if Apple were to introduce a $300 contract-free iPhone, they could capture up to 11% of the low-end device market. Munster believes that this is possible for Apple to accomplish and also notes that the lower cost iPhone may be introduced this year, in September.
There are reports and rumors that support the possibility of a lower end iPhone for emerging markets, with Apple currently holding up to 42 percent of the high end smartphone market. Currently, Apple’s iPhone has a gross margin of 55%, which can be reduced to 30% if Apple were to introduce a lower cost iPhone. This means that the price would be cut in half, which would likely draw the attention of more potential customers.
It is possible that a lower cost iPhone would cannibalize sales of the current iPhone, meaning that the gross margin would drop by about 2%. Piper Jaffray has been most accurate in estimating Apple’s price target, lowering it from $767 to $688. Munster also noted that Apple will perform below the Wall Street estimate of $39.6 billion with about $35 billion. Apple is scheduled to report Q2 2013 earnings on April 23rd.