iPhone 16e Redefines Apple's Budget Offerings But Citi Spots Key Risks

Almost three years post the release of iPhone SE comes the iPhone 16e launch. This phone, according to brokerage firm Citi, redefines the California-based tech giant's budget offering. However, there are some key risks spotted as well.

The model comes with an in-house modem and supports Apple Intelligence powered by A18 chip. Apple sees the 16e closer to the iPhone 16 family than the SE category, notes the brokerage.

The brokerage notes the significant improvement in battery life. The model comes with an attractive 6.1-inch OLED display, Face ID and action button. Further, the new model comes with one rear camera but lacks MagSafe support.

The starting price of iPhone 16e is set at $599, which the brokerage notes, is a bit higher than its expectations. The brokerage further said that this could be justified with the hardware to support Apple Intelligence.

Citi maintains its ‘buy’ rating on Apple's stock with no change in thesis, as it believes a premium is warranted to reflect expanding gross margins of the company. The brokerage also notes the growing services sales mix, gradual Apple Intelligence adoption, and strong balance sheet as key positives that justify its positioning on the company.

There are some risks that Citi has highlighted despite the broadly positive outlook. The weaker macroeconomic conditions, or shifting consumer demand around handsets might change the projected demand-driven growth of the company.

Zooming out, the uncertainty around US-China tensions remain as geo-political stands and cues continue to be mixed. The worry deepens as changes will impact Apple’s supply chain, as the company is heavily reliant on suppliers and manufacturers in both Taiwan and mainland China, it said.

Additionally, risks around regulatory frameworks like Digital Markets Act in Europe, would push Apple to allow alternative app store on its iPhones and iPads and reduce app store revenues in the region, added Citi.

Finally, the brokerage notes that the institutional investors remain cautious to add to their position due to the heavy weight the company has in the market index.