By Inflation Impact on iPhone Pricing
Apple (ticker: AAPL) is all set to unveil its latest generation of phones, potentially named the iPhone 15, at a highly anticipated product launch event on September 12. While Apple has remained tight-lipped about the specifics of the new device, Wall Street analysts predict that the base model will cost only slightly more than the original iPhone when adjusted for inflation.
According to media reports, the estimated cost of the iPhone 15’s base model is $799, mirroring the price of the iPhone 14 released last year. It’s worth noting that when the first-ever iPhone was launched back in June 2007, it carried a price tag of $499.
At first glance, this seems like a considerable increase. However, when factoring in inflation, the difference appears much smaller.
To put things into perspective, ‘s utilized the Bureau of Labor Statistics’ inflation calculator to determine the purchasing power equivalent of the original $499 price in today’s dollars. As per the calculations, $499 in 2007 would be approximately $730 today. Consequently, taking into account all the added features and advancements, the new iPhone could come at a cost only around $70 more than its predecessor.
In fact, when considering inflation-adjusted values, it’s apparent that the new iPhone may prove to be less expensive than the base models of its preceding generations: iPhone 11, 12, 13, and 14. All these devices were valued above $800 in today’s dollars.
Wedbush analyst Dan Ives remarks, “It’s a remarkable offering for consumers. I firmly believe that even with a higher price, Apple could retain an impressive customer base.”
However, it’s crucial to acknowledge that our calculations pertain specifically to the base model iPhone. Over time, Apple has expanded its iPhone lineup, introducing various upgrades that make direct price comparisons across generations challenging. For instance, media reports suggest that the iPhone 15 Pro will likely be priced at $1,099, marking a $100 increase from its predecessor, the iPhone 14 Pro.
The Impact of Rising Prices on Consumer Demand
It is no secret that consumers across the globe are feeling the pinch of rising prices. The persistent high inflation rates, coupled with increasing interest rates for financing big purchases, have made it challenging for individuals to maintain their buying power. The latest earnings report from Apple further highlights this issue, as iPhone sales have declined compared to the previous year.
However, it is worth noting that the declining demand for iPhones is not an isolated problem for Apple. The entire smartphone market has been hit by a drop in worldwide shipments during the second quarter. Experts attribute this decline to various factors, including soft demand, inflationary pressures, macroeconomic uncertainties, and excess inventory. The International Data Corporation, a leading market research firm, emphasized these concerns in a report dated Aug. 11.
Amidst these challenges, Apple seems reluctant to increase the cost of its new iPhone models. Speculation suggests that the forthcoming release may feature minimal updates. Additionally, Apple has successfully managed to reduce the cost of iPhone production by manufacturing more of its own chips.
Industry analyst Ives believes that a new iPhone, offering advanced camera capabilities, increased storage, and faster speeds, at a price similar to that of the original model, could spark a “renaissance of growth” for Apple’s stock over the next 12 to 18 months.
Furthermore, Ives suggests that there is significant potential for iPhone upgrades among individuals who have not updated their devices in over four years. Current estimates suggest that approximately 250 million iPhones fall into this category.
Given his analysis, Ives rates Apple shares as Outperform, with a $230 price target. This projection suggests a 25% upside from the current price of $184, making it one of the highest price targets on Wall Street. It is important to note that the average target among analysts tracked by FactSet stands at $201.78.
Apple’s ability to capture consumer interest goes beyond pure economics. As Ives asserts, food, water, and smartphones have become the average person’s top priorities in today’s digital age. With this in mind, it is unlikely that the price alone would deter individuals from eagerly lining up to get their hands on the latest iPhone model.
In conclusion, the impact of rising prices has undeniably affected consumer demand for smartphones. Apple’s strategy to offer competitive pricing and potential advancements in the upcoming models may prove crucial in reinvigorating growth for the company.
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