Is Apple's iPhone 15 pricing strategy a risky bet or right for this economy?

By Emily Bary

Analysts debate Apple's decision to keep iPhone 15 prices largely the same

Pricing is the hot topic yet again for Apple Inc. as the company's new iPhone 15 lineup lacked ground breaking feature improvements.

Wall Street wasn't expecting too many big changes to the iPhone's feature set going into Tuesday's launch event, and investors were mainly watching to see how Apple (AAPL) would approach pricing after years of holding iPhone prices steady. The thinking was that Apple could boost the price of its Pro-level models by $100 or $200 relative to their predecessors.

Apple event:iPhone 15, Apple Watch Series 9 and everything else on the way

That didn't quite happen. The company ended up eliminating what had been the cheapest Pro Max option, which had an 128GB storage configuration. That means the starting price of an iPhone 15 Pro Max is now $1,199 versus $1,099 for the least expensive iPhone 14 Pro Max, but you get 256GB of storage. A 256GB iPhone 14 Pro Max also used to cost $1,199, so whether Apple actually hiked prices there is a subject of debate among analysts.

Meanwhile, Apple kept prices the same on its other three models, including the regular iPhone 15 Pro.

Read:How does the iPhone 15 compare to the latest Pixel and Galaxy devices?

UBS analyst David Vogt called the pricing decisions "modestly disappointing" for trends in average selling prices. He estimates that 40% to 50% of iPhones sold in the first few quarters are Pro or Pro Max versions, so an $100 boost to all storage configurations could have meant a 4% to 5% revenue tailwind on the iPhone.

"Therefore, given the soft sell-through [so far this quarter] and lack of a price increase, we are increasingly concerned that Sept and Dec iPhone units/revenue are increasingly at risk," he wrote.

"In addition, rising component costs and more complexity (new silicon, cameras, titanium casing etc.) potentially leading to a higher bill-of-materials in the new Pro and Pro Max models relative to last year could pressure Product contribution margins going forward," Vogt continued, though he said he would "reserve judgement" until experts do teardowns of the lineup.

He rates the stock at neutral with a $190 target price.

See also: 'iPhones are depreciating devices:' Should you buy an iPhone 15 or invest $800 in Apple stock?

JPMorgan's Samik Chatterjee chimed in that "while pricing was not effectively raised, the increase in the starting price for the Pro Max and the widening of the price differential to other models in the lineup could drive negative mix implications relative to prior years, which will be worth monitoring through early consumer demand indications."

He has an overweight rating and $230 target price on the stock

Citi Research analyst Atif Malik was more upbeat, writing that the iPhone 15 lineup is "a much bigger spec upgrade" relative to the iPhone 14 line than the iPhone 14 was relative to the iPhone 13.

He sees the potential for a "strong replacement cycle" given the large base of users who currently own the iPhone 12 and are due for upgrades.

Additionally, Malik weighed in on Apple's pricing moves, as the company eliminated what had been the cheapest and smallest Pro Max option but kept prices the same on its other three models.

"[W]e believe flat pricing on the three models could help lift units in a tough macro environment," he wrote, while maintaining a buy rating and $240 target price on the stock.

-Emily Bary

This content was created by MarketWatch, which is operated by Dow Jones & Co. MarketWatch is published independently from Dow Jones Newswires and The Wall Street Journal.

(END) Dow Jones Newswires

09-13-23 1051ET

Copyright (c) 2023 Dow Jones & Company, Inc.