Will Apple Inc.‘s (AAPL) new iPhone 5S become the new “gold standard” of smartphones? Is the iPhone 5C ushering in a new era of “fantastic plastic” iPhones?
Bad puns aside, that’s what the gadget giant is hoping for.
Amid plenty of fanfare, Apple Inc. unveiled two new iPhones to members of the press and tech community—a low-cost model (the 5C) and a fancier reboot of the iPhone 5 (the 5S). With its latest reveal, Apple Inc. broke out of its comfort zone on several fronts:
Starting at $99 with a two-year contract, the 5C is the first iPhone with a plastic case. The company ditched the traditional metal case in order to cut production costs, appealing to more price-conscious consumers around the globe. In the words of Apple’s design guru, the 5C is “beautifully, unapologetically plastic.”
Starting at $199 with a contract, the 5S will have the same price as the original 5, but will include a few jazzy features. First, the phone comes standard with Touch ID—a sensor that recognizes users’ fingerprints for a variety of security applications. Apple was able to include this technology after having acquired fingerprint firm AuthenTec last summer. Other upgrades include the new A7 processor and the M7 motion co-processor. In total, the 5S boasts a processing speed that’s forty times faster than the original iPhone.
And as I alluded to before, the iPhone 5S comes with a more mature look—customers can choose from silver, gold or slate. Meanwhile, Apple’s cheaper handset comes in a variety of hues, including lime green and bright blue. Clearly the 5C was designed to appeal to a younger set and redefine what has been one of the industry’s costliest smartphones.
Both phones will be available by September 20, but it’s too soon to tell whether they will be a game changer for Apple. While the company is clearly trying to capture market share in emerging economies, the lower price point for the 5C will weigh on margins as it boosts revenues. And one glance at analyst earnings estimates for this quarter and the next shows that AAPL is no longer a growth stock.
Currently, the analyst community expects sales to be flat through the end of the year, and for earnings to continue to fall (at a 12.2% annual rate this quarter and at a 2.5% rate next quarter). On top of this, analysts have cut this quarter’s consensus EPS estimate by $0.65, or 7.9%, over the past ninety days. This suggests that Apple could underperform even these meager estimates when it releases earnings around the end of October.
So despite all of the pomp and circumstance, I have AAPL down as a sell. It will take a bit more than two flashy new iPhone models to get me to recommend this stock for new money.