September 24, 2023


Unlimited Technology

Apple’s New Lower-Cost iPhone: A Key Catalyst

There weren’t any big surprises at Apple‘s ( AAPL -3.50% ) event on Tuesday, but that doesn’t mean the event was a letdown. The tech giant unveiled a range of new products, including:

  • An all-new high-end Mac for professionals called Mac Studio and a customizable display to go with it called Studio Display
  • Two new green finishes for the iPhone 13 lineup
  • A new iPad Air model
  • Live sporting events on Apple TV+

While all of these announcements are important, one announcement on Tuesday will likely be particularly impactful on the tech company’s near-term financial performance: the new iPhone SE. Here’s what we know about the new device, and why it will likely prove to be an important catalyst for Apple’s business.

Meet Apple’s new iPhone SE

Apple’s new iPhone SE is the company’s lowest-cost smartphone in its lineup, with a starting price of $429. Importantly, this price is far below the starting prices of its iPhone 13 Pro and iPhone 13 Pro Max at $999 and $1,099, respectively. Further, it’s still priced meaningfully below its mid-tier iPhone 13 mini and iPhone 13, which have starting prices of $699 and $799, respectively.

But even with its cheapest iPhone, the company is still able to flex some pricing power — an important trait in an inflationary environment. The predecessor to this iPhone SE, which was launched two years ago, was $399. The iPhone SE, therefore, is getting a price hike.

Apple's next-generation iPhone SE.

Next-generation iPhone SE. Image source: Apple.

Despite boasting a price that’s less than half the starting price of Apple’s iPhone 13 Max, the new device is packed with high-end technology. First and foremost, iPhone SE has 5G connectivity — a first for the SE product line. Additionally, the smartphone boasts Apple’s latest A15 bionic processor. It also doesn’t skimp on the display, which measures 4.7 inches and is made of the company’s toughest glass (on the front and back) — the same glass used in its iPhone 13 and iPhone 13 Pro.

Why it matters

The new iPhone SE is good news for investors for several reasons. First, the company’s move to roll out a new iPhone model suggests that Apple is likely managing supply chain challenges well, if not better than expected. The company said in its fiscal Q1 earnings call that supply constraints led to over $6 billion of lost revenue during the quarter.

Looking ahead, management said it expected “significant supply constraints” in fiscal Q2 albeit with some improvement from fiscal Q1. Bringing to market a new iPhone suggests that the company is ready to handle incremental demand.

The more obvious reason investors should be upbeat about a new iPhone is that the smartphone segment still represents the lion’s share of the company’s revenue. In fiscal Q1, for instance, iPhone revenue was $71.6 billion, or 58% of revenue. By bringing to market a new iPhone in the summer, the company can help bolster the massive segment in a way that contributes meaningfully to earnings per share.

Expectations are conservative for Apple’s business in fiscal Q2. On average, analysts expect revenue of $94 billion, or 5% growth. With deliveries of the new model starting on March 18, the smartphone, along with Apple’s other new products, increases the odds of the company delivering better-than-expected revenue.

Though the impact of the new product will likely be small since it’s only available a few weeks during the current quarter, it sets the company up well for fiscal Q3. More importantly, the broad set of new products highlights Apple’s operational strength amid a challenging environment.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis – even one of our own – helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.

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