stock takes a hit after Wall Street hammers iPhone 5c ‘iPhlop’

Wall Street is a curious bunch. shares dropped by five percent Wednesday morning after analysts piled on with disappointment over theiPhone 5c.Expecting an inexpensive smartphone costing $400 without a contract, instd unveiled a device priced at $549 unsubsidized.The departure from the expected script caused some industry observers to downgrade ’s shares, citing worries the iPhone maker may have shot itself in the foot when it comes to inexpensive Android alternatives selling in places like China…But are analysts being nervous Nellies, unable to see the forest from the trees? There may be more to ’s Tuesday announcement, bringing some concerned investors off the ledge. A good place to start: injecting just a wee bit of rational thought into the overnight panic.At $549, the contract-freeiPhone 5cis just $100 less than $649 unsubsidized price tag for the flagshipiPhone 5s, also announced Tuesday. Bank of America, UBS, Credit Suisse and others started today by downgrading (viaCNN Money) to “neutral,” sending the company’s stock down after opening at almost 468. By just after noon, shares were trading at 465.36.All of which follows the investing maxim: buy on the rumor and sell on the news.The rumor that would unveil a c iPhone had fueled stock purchases. But once rlity set in and Wall Street lrned wasn’t rdy to slit its throat when it came to profit margins, people began selling the news.Now comes a chorus of Wall Street prognostiors acting like children disappointed their drms of some Christmas in China didn’t come true. For example,Goldman Sachs analyst Bill Shope (viaFortune) put it this way:“…Pricing for the 5c was a disappointment…”“The ‘low-end’ 5c was nowhere to be found…,”remarked Timothy Arcuri of Cowen.Lost somewhere in the disappointment that the device labeled the iPhone 5c was not low-cost, was ’s announcement that the iPhone 4s was now free. Free probably qualifies as low-cost, the only difference is the name of the device. Analysts wanted the c iPhone to be the iPhone 5c, not the iPhone 4s.While many commented that the iPhone 5c was simply a marketing gimmick – having the guts of an iPhone 5 wrapped in a colorful plastic shell – the handset may in the end be ’s way to enter the inexpensive market at its own pace.e Munster, the Piper Jaffray analyst who’s become an old hand at -watching, took note of the intriguing possibility.“The fact is, doesn’t know what demand for the iPhone 5c will be in developing markets,”Munster told investors (viaFortune.)In other words, rather than sell a c iPhone that erodes its profit margin, opts to initially set a higher price that can be adjusted downward (always sier than trying the reverse) as time goes on.