Analyst: Cheaper iPhone Will Heal the Stock

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Measurable Impact on Results

According to Munster, Apple has seen a “measurable impact” on its results over the years from introducing cheaper product introductions and that the lower-priced iPhone could be “slightly dilutive” to his 41.5 percent gross margin target for Apple for 2014.

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“While we expect the lower priced iPhone to carry reduced features like a lower quality screen, casing, and potentially processor, we believe the phone will carry a lower margin than the standard iPhone,” the analyst said.

However, the device will still possibly pull in $6.5 billion in revenue this year at a gross margin of around 30 percent — while current iPhone models have a gross margin between 55 and 60 percent. And while the average selling price of the Apple smartphone was likely to fall from its current level of around $640 to about $520, by the end of 2013, 30 percent of all iPhone sales would be from this new model, Munster said.

Don’t Miss: Analyst: Here’s Why Apple Needs a Cheaper iPhone.

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