Apple's iPhone 5c may be doing just fine

The iPhone 5c can't catch a break. Should investors worry?

a woman

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

First, the iPhone 5c wasn't as cheap as the Street had anticipated. Then retailers began to discount the phone. And now The Wall Street Journal is reporting that Apple (NASDAQ:AAPL) is cutting iPhone 5c orders. The iPhone 5c can't catch a break. Should investors worry?

Useless speculation
"Apple Cuts iPhone 5c Orders," read the WSJ headline before it was adjusted later in the day to "Apple's Dual iPhone Strategy in Doubt." Both headlines suggest Apple's new iPhones might not be doing very well. The underlying story, however, wasn't as bearish. Even more, the story was based on questionable information.

The article could have just as likely been titled "Apple Boosts Orders for its Flagship Phone" — because that tidbit was also in the WSJ article. Though either story makes interesting news, neither reports of Apple cutting or boosting orders provides any meaningful information for investors. Apple CEO Tim Cook said it best during Apple's first-quarter 2013 earnings call, when he warned against using supply-chain information to gain insight into Apple's business.

I suggest its good to question the accuracy of any kind of rumor about build plans. Even if a particular data point were factual, it would be impossible to interpret that data point as to what it meant to our business. The supply chain is very complex and we have multiple sources for things. Yields can vary, supplier performance can vary. There is an inordinate long list of things that can make any single data point not a great proxy for what is going on.

Analysis
Not all news regarding the iPhone 5c is purely speculation, however. There's some investor-worthy analysis out there, too.

Wells Fargo Securities analyst Maynard Um, for instance, takes an interesting look the why the Apple's iPhone 5c makes sense. Borrowing from last year as an example, Um illustrates potential for 5c demand to ramp up going into the holidays. This isn't the first year Apple has a smartphone priced US$100 less than its flagship phone. In fact, it's part of Apple's regular strategy. So, what can we learn from last year? According to Um:

In last year's iPhone launch, the iPhone 5 came out to a strong start as early adopters drove up sales. However, in the mass market holiday season upgrade cycle, iPhone 4s unit sales started ramping, which we believe was due to its US$99 starting price point. We believe the 5c could see a similar occurrence as the mass market selling season starts to ramp up into November and December.

And there's arguably no reason a new iPhone 5c with a unique form-factor won't provide at least an equally convincing value proposition to casual consumers this holiday season than the iPhone 4s did last year.

Finally, though it's easy to say Apple would have been better off pricing the iPhone 5c lower, there are also reasonable arguments against such a decision. "We believe Apple's choice was twofold — maintain pricing and, thus, margins (which is a certainty) or lower pricing, take lower margins, and hope for unit volumes to offset. We think the latter was a riskier, uncertain proposition with no guarantee of price elasticity driving volumes," said Um.

And here's another solid justification for Apple's decision on the iPhone 5c's pricing in fewer than 140 characters. "Apple knows buyers will pay US$100 for a significantly desirable upgrade. Were the 5c > $100 cheaper, fewer would rationalise 5s sale," said AppleInsider's Daniel Eran Dilger in a tweet recently.

Don't fret
Though the iPhone 5c has been bashed by headlines, it's still way to early to decide how the phone is doing in the marketplace. To really have any idea how the company's dual iPhone strategy is faring, investors will have to wait to see not only Apple's fourth-quarter results, but its first-quarter results, too — which spans through the holidays.

Stick to Cook's advice and ignore supply checks. For all we know, the iPhone 5c may be doing just fine. Even more, there are solid arguments Apple made the right pricing decision with the phone in the first place.

The Australian Financial Review says "good quality Australian shares that have a long history of paying dividends are a real alternative to a term deposit." Get "3 Stocks for the Great Dividend Boom" in our special FREE report. Click here now to find out the names, stock symbols, and full research for our three favourite income ideas, all completely free!

More reading

A version of this article, written by Daniel Sparks, originally appeared on fool.com.

Should you invest $1,000 in Future Generation Global Investment Company right now?

Before you buy Future Generation Global Investment Company shares, consider this:

Motley Fool investing expert Scott Phillips just revealed what he believes are the 5 best stocks for investors to buy right now... and Future Generation Global Investment Company wasn't one of them.

The online investing service he’s run for over a decade, Motley Fool Share Advisor, has provided thousands of paying members with stock picks that have doubled, tripled or even more.*

And right now, Scott thinks there are 5 stocks that may be better buys...

See The 5 Stocks *Returns as of 30 April 2025

More on Investing

A white and black robot in the form of a human being stands in front of a green graphic holding a laptop and discussing robotics and automation ASX shares
Technology Shares

Joining the revolution: How I'd invest in ASX AI shares right now

Advances in artificial intelligence (AI) could usher in a new industrial revolution. Here’s how you can invest in it.

Read more »

Close up of baby looking puzzled
Retail Shares

What has happened to the Baby Bunting (ASX:BBN) share price this year?

It's been a volatile year so far for the Aussie nursery retailer. We take a closer look

Read more »

woman holds sign saying 'we need change' at climate change protest
ETFs

3 ASX ETFs that invest in companies fighting climate change

If you want to shift some of your investments into more ethical companies, exchange-traded funds can offer a good option

Read more »

a jewellery store attendant stands at a cabinet displaying opulent necklaces and earrings featuring diamonds and precious stones.
Investing

The Michael Hill (ASX: MHJ) share price poised for growth

Investors will be keeping an eye on the Michael Hill International Limited (ASX: MHJ) share price today. The keen interest…

Read more »

ASX shares buy unstoppable asx share price represented by man in superman cape pointing skyward
Investing

The Atomos (ASX:AMS) share price is up 15% in a week

The Atomos (ASX: AMS) share price has surged 15% this week. Let's look at what's ahead as the company build…

Read more »

Two people in suits arm wrestle on a black and white chess board.
Retail Shares

How does the Temple & Webster (ASX:TPW) share price stack up against Nick Scali (ASX:NCK)?

How does the Temple & Webster (ASX: TPW) share price stack up against rival furniture retailer Nick Scali Limited (ASX:…

Read more »

A medical researcher works on a bichip, indicating share price movement in ASX tech companies
Healthcare Shares

The Aroa (ASX:ARX) share price has surged 60% since its IPO

The Aroa (ASX:ARX) share price has surged 60% since the Polynovo (ASX: PNV) competitor listed on the ASX in July.…

Read more »

asx investor daydreaming about US shares
How to Invest

How to buy US shares from Australia right now

If you have been wondering how to buy US shares from Australia to gain exposure from the highly topical market,…

Read more »