Appleā€™s iPhone SE launch is a test run for the main event

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Apple Inc. showed that itā€™s not letting the COVID-19 pandemic slow it down too much as the company debuted its long-awaited second-generation iPhone SE device Wednesday.

AppleĀ AAPL,Ā -0.91%Ā skipped a launch event and unveiled the phone via a press release, so the announcementĀ lacked the fanfare that typically accompanies the debut of a new iPhone, but the news gave analysts more confidence in the companyā€™s ability to maintain business operations and attract smartphone customers even as the pandemic rocks the economy.

The iPhone SE launch can be viewed as a trial run for Appleā€™s main event: the debut of its flagship 5G iPhone, which is expected out later this year. With the SE, Apple gets to test out how to build, market, and ship a new phone in the midst of a global health crisis.

Apple reportedly had been planning to debut the phone in March, with the launch pushed back due to the COVID-19 outbreak, which disrupted Appleā€™s supply chain as China extended its Lunar New Year holiday. But that didnā€™t set back the iPhone SE too much, as the device will become available April 24, with pre-orders starting April 17.

Shares of Apple were down 0.9% in Wednesday trading, and theyā€™ve dipped 8.6% over the past three months as the Dow Jones Industrial AverageĀ DJIA,Ā -1.86%Ā has lost 19%.

Appleā€™s second-generation iPhone SEĀ starts at $399 for a 64GB modelĀ and is meant to be especially appealing in emerging markets where consumers lower-cost devices are more popular. The device features Appleā€™s A13 Bionic chip, which the company calls ā€œthe fastest chip in a smartphoneā€ and a single-camera system that supports Portrait mode.

Unlike some newer models, the iPhone SE still has a physical home button and a 4.7-inch retina screen. It will be available in black, white, and red, and those who purchase the device will be eligible for a one-year free trial of the Apple TV+ service.

ā€œThe first iPhone SE was a hit with many customers who loved its unique combination of small size, high-end performance and affordable price; the new second-generation iPhone SE builds on that great idea and improves on it in every way,ā€ Appleā€™s vice president for worldwide marketing Phil Schiller said in a release.

The announcement made some analysts more upbeat about Appleā€™s near-term prospects.

ā€œWhile the launch and much of the specs/pricing are in-line with broader expectations, we would view the announcement as positive in light of the current economic environment,ā€ wrote Wells Fargoā€™s Aaron Rakers. ā€œWe believe the iPhone SE will appeal to users of older devices such as the iPhone 6/6S/7, and could spur those users to upgrade as a COVID-19 recovery materializes.ā€

The original SE model only accounted for about 7% of iPhone shipments during its lifetime, Rakers said, citing IDC data, but he still views the presence of a low-cost phone as playing ā€œan important role in onboarding customers to Appleā€™s expanding product / service ecosystem.ā€ Rakers rates Appleā€™s stock at overweight with a $315 target.

Read:Ā Can Apple make new iPhones while dealing with coronavirus, and who will buy them?

Evercore ISIā€™s Amit Daryanani said that the iPhone SE ā€œshould help Apple regain some of the share it has lost in more price-sensitive markets like India and China.ā€ It could also prompt consumers in developing markets who have phones more than three years old to consider an upgrade, he said, while maintaining an outperform rating and $325 target price.

Raymond James analyst Chris Caso wrote that while the iPhone SE is $50 cheaper than the iPhone 8 was, it will likely have similar margins because Apple was able to trim some costs for this newer device.

Apple has removed the older iPhone 8 and 8 Plus from its lineup as it added the iPhone SE, which Caso said ā€œfixes a problem in Appleā€™s lineup, in that a dual camera phone (iPhone 8 Plus) was cheaper than the single camera iPhone XR.ā€

He has an outperform rating on the stock.

RBC Capital Markets analyst Robert Muller chimed in that the SE serves ā€œas a reasonable option for customers with budgets that are compromised because of COVID-19 and/or, [who] due to stay-at-home orders, are spending significant amounts of time on oneā€™s phones and are noticing performance deficiencies.ā€ At the same time, he cautioned that the device might cannibalize sales of more expensive models.

Muller rates the shares at outperform with a $345 price target.

Originally Posted on MarketWatch

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