A few weeks back, we wrote an article titled Apple Loses Market Share in Europe as Cash Strapped Buyers Pass on iPhones, wherein we discussed that due to the Euro crisis Europeans may be looking beyond expensive iPhones and opting for cheaper alternatives powered by Google’s (NASDAQ) Android.
A study by the Kantar Group, a research firm based in London, revealed that Apple’s (NASDAQ:AAPL) smartphone market share declined in France, Germany, Italy and Spain to name a few in the last few months. 
In a more recent study by the same firm, Apple’s share of the smartphone market in the U.K. jumped by 7 percentage points year-over-year to reach 29%.  In contrast, in the U.S. smartphone market, the iPhone grabbed 48% market share compared to only 43% by Android. These results go to show that Apple continues to make rapid strides in the smartphone market, albeit more in the developed markets.
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Our $550 price estimate for Apple stock is about 10% above the current market price.
How Apple Could Capture Value in Weaker Economies
As shown in the above reports, Apple is dominating the developed markets. However, more price sensitive markets such as emerging markets or certain struggling European economies is a large opportunity for the company. Apple has traditionally maintained higher prices for the iPhone by leveraging its brand value and gained maximum profits in the process. However, we believe that Apple could gain by showing some price flexibility on the iPhone.
While, on one hand, this means it may have to compromise on relatively high margins, greater market share gains could make this sacrifice worthwhile.
Another option for Apple is to come up with a cheaper iPhone with cheaper specifications than the current iPhone 4S. Before Apple launched the iPhone 4S, there were strong rumors that it would release two versions of the iPhone with one better suited for emerging markets that are more price sensitive.Notes:
- New iPhone? No thanks, say cash-conscious Europeans, Reuters quoting research firm Kantar Worldpanel ComTech as the source, December 22nd, 2011 [↩]
- Kantar Press Release, February 20th, 2012 [↩]