iPhone 11 pricing shows Apple is learning from past mistakes.
KEY POINTS
- Apple announced its newest, basic model will be priced at $699 rather than $749.
- Apple has shown an ability to be tactical and understand the market dynamics” with its pricing, says Bank of America’s Wamsi Mohan.
- The tech giant is selling the iPhone 11 at a price drop that will hopefully draw in customers since iPhone unit sales peaked in 2015.
Apple on Tuesday announced its new iPhones with improved technology, but the focus is on the attractive price point. The tech giant is selling the iPhone 11 for $699, a $50 price drop from last year’s equivalent model. The lower pricing is an unusual move for the company, which has historically maintained premium pricing.
But analysts believe Apple’s newfound pricing strategy could rekindle iPhone sales, which peaked in 2015. Apple stopped reporting unit sales this year.
“Apple has shown an ability to be tactical and understand the market dynamics,” said Wamsi Mohan, senior equity research analyst at Bank of America Merrill Lynch, on “Squawk Alley.”
A Goldman Sachs analyst echoed similar sentiments to CNBC earlier in the day.
“The pricing on the iPhone, the base iPhone, is attractive,” said Rod Hall, a senior equity analyst. “I would expect unit share to shift over to that aggressively.”
Hall added that there’s not much room left to raise prices on the iPhone, even though it becomes “more attractive” with upgrades.
It’s a move that took several analysts by surprise.
“We came out largely positive from the event… led by Lowered Pricing of iPhone 11 relative to XR, which could act as a positive driver for volumes in the entry-level premium smartphone segment,” wrote J.P. Morgan in a research note Wednesday.
However, Hall said he’s not confident the drop in price will boost sales.
“You’re probably not going to get a lot more unit demand coming through as a result of that lower price,” he said.
Shares of Apple rose around 2.87% on Wednesday after climbing more than 1% on Tuesday.