Agency Report
Apple announced its latest, lower-priced iPhone on Wednesday: the 16e. The lower-cost product isn’t as cheap as Wall Street thought it would be, but could still help increase sales of the smart device around the world.
The new iPhone’s price starts at $599 and will be available for preorder on Feb. 21 and in stores on Feb. 28.
“We’re so excited for iPhone 16e to complete the lineup as a powerful, more affordable option to bring the iPhone experience to even more people.” Kaiann Drance, Apple’s vice president of Worldwide iPhone Product Marketing, said.
While the price is more affordable than other options in the iPhone 16 lineup, it’s still more than analyst estimates. UBS’s David Vogt and Evercore ISI’s Amit Daryanani both wrote in research notes on Sunday that they expected the phone to start at about $500.
Apple’s cheaper iPhone SE line was originally released in 2016 and hasn’t been updated since 2022. The 16e suggests a new strategy for the name of Apple’s lower-priced models. This isn’t a cheap iPhone with fewer specs—it’s a more affordable option that gives access to a new generation of AI powered smartphones.
The 16e is a more bare-bones version of the iPhone compared with the latest models and costs less than the $799 price tag that the base iPhone 16 model carries. But the 16e is more expensive than previous SE models. The latest SE model started at $429.
One reason for the price tag is that the iPhone 16e will offer the company’s AI software and be powered by the A18 chip. That could help increase sales. Apple previously noted that markets where Apple Intelligence has been rolled out have outperformed markets where it hasn’t yet.
Apple also said that the 16e will include the new Apple C1, the first cellular modem designed by Apple. This news comes after investors have been waiting for updates on the company’s partnership with Qualcomm, which has been designing modems for iPhones.
The pricing of the 16e could mean a boom—or bust—for Apple as it tries to improve iPhone sales and expand its business in emerging markets.
“Given the SE4 is expected to support ‘Apple Intelligence’, there is risk consumers trade down from the base model of the 15/16 series,” Vogt wrote before the release.
That means Apple could lose revenue dollars from consumers who want to update their phones to gain access to Apple Intelligence if they decide to pick the less expensive upgrade option.
Still, an upgrade is a good thing for Apple no matter the phone. Plus, the 16e is more expensive than expected, meaning people who upgrade to that device are spending more than Wall Street initially thought they would.
“We think it is encouraging to see Apple increase pricing after years of holding prices steady and it’s possible this could be a test case for increasing the entry price of the iPhone 17 line up,” Daryanani wrote in a new note on Wednesday.
The 16e also has an improved battery life from its predecessors. Apple said it can last up to six hours longer than the iPhone 11 and up to 12 hours longer than all generations of iPhone SE.
Following in the footsteps of other iPhone updates, the 16e includes hardware changes like removing the home button and including a USB-C charging port.
Apple shares closed around the break-even mark after the announcement, up 0.2% at $244.55.
iPhone sales make up most Apple revenue, and that means investors want to see improving trends for the smart device. Demand has been under pressure. The company reported $69.1 billion in first-quarter iPhone sales on Jan. 30, which was down 1% from a year ago and missed analyst estimates of $70.7 billion. Apple also saw Greater China revenue drop 11% from the previous year.
China has been a difficult market for Apple as competitors like Huawei take share. Not only are iPhones expensive, but Apple Intelligence isn’t available globally yet. Investors believed that Apple Intelligence would boost demand for iPhones and lead to a massive upgrade cycle to new devices, but with the prolonged rollout of the software, that hasn’t happened yet.
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