This Day On The Street
Continue to site right-arrow
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here
Stocks Under $10 with 50-100% upside potential - 14 days FREE!

How Apple Gets Its Growth Back

Stocks in this article: AAPL CHL

NEW YORK ( TheStreet) -- It's no secret that the smartphone market is slowing. Apple (AAPL) shares have dropped sharply over the past nine months on iPhone sales concerns. Chief competitor Samsung posted record results last night that weren't good enough for investors. If Apple's going to get its "groove" back, it's going to have to do something different.

Topeka Capital Markets analyst Brian White has a research note that a low-end iPhone, which many analysts have suggested previously, would allow Apple to compete in China, and recapture some of the lost magic Apple had over the years.

"We believe a $350 to $400 price point for a lower-priced iPhone would make sense and 42% below the $649 price point for an unlocked 16GB iPhone 5," White wrote in his note. "A $350-$400 price range would also be competitive with China-based Xiaomi that offers a high-end phone experience at a mid-range price of ~$320 in China. We believe a $350-to-$400 price point will allow Apple to significantly expand its reach in the smartphone market and better address developing markets such as China, while opening up more opportunities in Brazil, Russia, India and elsewhere."

The chief concerns about a low-cost iPhone are gross margins. Apple has extremely high gross margins for a hardware company north of 37%. They have been coming down in recent quarters, as Apple has introduced lower priced products to hold on to or recapture market share, including the iPad mini. A low-end iPhone could potentially hurt Apple's margins.

Lower margins might be worth it for Apple, especially if it can capture some of the low-end market, especially in China. Apple is behind competitors such as Samsung, ZTE and others in China, as its products are priced out of the reach of many consumers. Many of these lower cost smartphones run Google's (GOOG) Android operating system, which has a dominant market share across the globe. As of the end of the first-quarter, Android held 75% of the market, as opposed to Apple's iOS, which owned 17.3% of the market.

Perhaps that's been one sticking point on a deal with China Mobile (CHL), the world's largest wireless carrier. White notes that China Mobile has 735 million subscribers, "or 63% of the country's mobile subscriber base." However, he doesn't expect a deal with the world's largest carrier to happen until 2014.

1 of 2

Select the service that is right for you!

Action Alerts PLUS
Try it NOW

Jim Cramer and Stephanie Link actively manage a real portfolio and reveal their money management tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
  • Weekly roundups
TheStreet Quant Ratings
Try it NOW
Only $49.95/yr

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
  • Upgrade/downgrade alerts
Stocks Under $10
Try it NOW

David Peltier, uncovers low dollar stocks with extraordinary upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
  • Weekly roundups
Dividend Stock Advisor
Try it NOW

Jim Cramer's protege, David Peltier, identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Alerts when market news affect the portfolio
  • Bi-weekly updates with exact steps to take - BUY, HOLD, SELL
Real Money Pro
Try it NOW

All of Real Money, plus 15 more of Wall Street's sharpest minds delivering actionable trading ideas, a comprehensive look at the market, and fundamental and technical analysis.

Product Features:
  • Real Money + Doug Kass Plus 15 more Wall Street Pros
  • Intraday commentary & news
  • Ultra-actionable trading ideas
Options Profits
Try it NOW

Our options trading pros provide daily market commentary and over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.

Product Features:
  • 100+ monthly options trading ideas
  • Actionable options commentary & news
  • Real-time trading community
  • Options TV
To begin commenting right away, you can log in below using your Disqus, Facebook, Twitter, OpenID or Yahoo login credentials. Alternatively, you can post a comment as a "guest" just by entering an email address. Your use of the commenting tool is subject to multiple terms of service/use and privacy policies - see here for more details.
Submit an article to us!


DOW 17,778.15 +421.28 2.43%
S&P 500 2,061.23 +48.34 2.40%
NASDAQ 4,748.3960 +104.0840 2.24%

Brokerage Partners

Rates from

  • Mortgage
  • Credit Cards
  • Auto

Free Newsletters from TheStreet

My Subscriptions:

After the Bell

Before the Bell

Booyah! Newsletter

Midday Bell

TheStreet Top 10 Stories

Winners & Losers

Register for Newsletters
Top Rated Stocks Top Rated Funds Top Rated ETFs