Apple inflation: iPhone, iPad, and Mac prices all surge amid new launches - Techies Updates

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Thursday, November 1, 2018

Apple inflation: iPhone, iPad, and Mac prices all surge amid new launches

Apple has pricing power and appears to be using it as prices go higher with every product launch in 2018. Will tech buyers push back?

In the past two months, Apple has launched the iPhone XS, iPhone XS Max, iPhone XR, iPad Pro, Mac mini, and MacBook Air. The common thread? Apple is testing how much it can raise prices -- and the prospect has Wall Street analysts salivating. Tech buyers may not be so happy.

Must read: Apple's new iPad Pro, MacBook Air, and Mac mini: Can feature, specs retain business momentum?

If we've learned anything about Apple in recent months and years, it's that the company has pricing power. While Samsung customers may choke on higher prices and push the company into more of a value-oriented pitch, Apple remains the luxury device maker.

We're about to find out just how far Apple can push price increases. To be fair, commodity costs have risen, and China tariffs are going to hit at some point. In many ways, Apple is just part of a broader inflation trend in the US economy. In other words, Apple isn't the only company looking to raise prices to preserve margins.

Another point to ponder is that Apple has raised premium device prices, but offered other devices like the iPhone XR to appeal to those of us that don't want to go higher than $1,000 for a phone.

Nevertheless, Apple's higher prices are hard to miss. Jefferies analyst Timothy O'Shea outlined the price increases following the iPad Pro and MacBook Air launch. He could hardly contain himself over the prospect of higher average selling prices boosting revenue.

O'Shea outlined what many of you are finding out as you configure Apple devices:

Hardware prices continue to rise across product lines. Starting at $799, the new 11-inch iPad Pro is 23 percent more expensive than the previous model's $649. Starting at $1,199, the new MacBook Air is 20 percent more expensive than the previous model's $999. And starting at $799, the new Mac Mini is a whopping 60 percent more expensive than its predecessor at $499. iPhone prices have risen 13 percent and 19 percent during the last two years.

O'Shea also noted that Apple has "clear pricing power in the near term" and is "clearly flexing its muscle here." The other wrinkle here is that accessory prices are going higher, too. The Apple Pencil costs $129, or 30 percent more than the first gen. The Smart Keyboard Folio starts at $179, 13 percent more than the older version. "Bottom line, after you spend 23 percent more for this year's iPad Pro, you also spend more on pricier accessories," he said in a research note.

It's a nice gig if you can get it. In technology, Apple is one of a few companies that can maintain pricing power. Analysts aren't going crazy raising their revenue projections for Apple, but they are likely to as soon as the company reports earnings on Thursday.

Apple is expected to report fourth-quarter revenue of $61.57 billion and net income of $13.48 billion. For fiscal 2018, Apple is expected to report net income of $58.91 billion on revenue of $264.03 billion. And that windfall is before the full effect of Apple's hardware refresh and price increases are seen. Here's a look at Apple's historical as well as projections for the future via Thomson Reuters.


1 comment:

  1. There are some interesting points in time in this article but I don’t know if I see all of them center to heart. There is some validity but I will take hold opinion until I look into it further. Good article , thanks and we want more! Added to FeedBurner as well