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Visitors inspect the new iPhone XR during an Apple special event at the Steve Jobs Theatre on September 12, 2018 in Cupertino, California. Apple released three new versions of the iPhone and an update Apple Watch.
- Apple's iPhone XR model pricing is "below expectation," Goldman Sachs says.
- The $749 selling price for iPhone XR with 64GB of storage is more attractive than its previous iPhone8/8+ models.
- The aggressive push toward Face ID is a possible foreshadowing of more Apple Pay developments, analysts said.
- Watch Apple trade in real time here.
Apple's iPhone XR pricing strategy shows the company is pushing users onto a more secure authentication, signaling that Apple Pay enhancements are coming, Goldman Sachs says.
"We see the lower price as evidence that Apple is pushing aggressively to move users onto more secure Face ID which may foreshadow Apple Pay enhancements in 2019," said a team of Goldman Sachs analysts led by Rod Hall in a note sent out to clients on Thursday.
The tech giant unveiled three new phones at an event in Cupertino, California, on Wednesday, launching two main versions, the iPhone XS and XS Max, and notably, a third cheaper model iPhone XR.
The iPhone XR starts at $749 with 64GB of storage, the same price as a smaller screened iPhone 8 256GB model and $50 more than an iPhone plus with 64GB of storage.
The XR's pricing is "below expectation" and "effectively obsoletes" the iPhone 8 and iPhone 8 plus units as "most consumers would opt for the iPhone XR in both cases," Goldman's analysts noted.
"The company tends to price in such a way that demand is spread across the lineup," they said, adding that the more aggressive push toward Face ID is a possible foreshadowing of more Apple Pay developments next year.
The cheaper iPhone XR pricing could lower average selling prices, but be offset slightly by a higher unit forecast, analysts added. Reflecting that, Goldman trimmed its full-year revenue guidance by 3.2% to $278.4 billion, which is just above the Wall Street consensus. It also cut its full-year earnings forcasts by 5.2% to $13.77, but held its price target of $240 for the trailing 12 months - 7% above where shares are currently trading.
But Morgan Stanley noted that Apple's two expensive versions - the XS ($999) and XS Max ($1,099) - could still lift iPhone average selling prices, and its dual SIM is a potential new demand driver, especially in China. As a result, Morgan Stantely raised price target by $2 to $247, and reiterated its "overweight" rating on Apple.
Apple shares were under pressure earlier this week after the company warned President Donald Trump's next round of tariffs on $267 billion worth of Chinese goods could lift prices of the Apple Watch and AirPods.
Tensions eased a bit Thursday after China welcomed an invitation from Treasury Secretary Steven Mnuchin to restart trade talks before Trump puts the tariffs in place.
Shares of Apple are up 31% this year.
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