Apple's $800 iPhone: Rumors Overblown

NEW YORK (TheStreet) --Apple's(AAPL) iPhone 5 will undoubtedly be a hot property when it finally makes its debut, although analysts say that rumors of an $800 iPhone are overblown.

Sparked by chatter in the blogosphere, Twitter has been alight with rumors that the iPhone 5 will cost $800. The hashtag '#800DollarsForaniPhone' was the top U.S. trending topic on Thursday morning, with 'iPhone 5 $800' also popular.

Analysts, however, believe that the rumor is overblown.

Hudson Square Research's Dan Ernst says that Apple's approach has typically been to pack more features into its phones, without massive price hikes.

If recent speculation is anything to go by, there will be significant changes to the iPhone. The phone is expected to have 4G or Long Term Evolution (LTE) capability, a 4-inch screen, and perhaps in-cell technology that lets Apple integrate touch sensors into the LCD making the phone thinner.

If Apple were to sell the high end version of the iPhone 5 at $800, this would be a stark contrast from previous versions. The 64 GB iPhone 4S costs $399 with a two-year contract from AT&T(T) , Verizon(VZ) or Sprint(S) . Apple has kept the price of its products fairly stable, so it's hard to see a drastic increase in price for the next iPhone. Ernst also noted that since developed markets have smart phone penetration above 50%, "carriers appear to be more interested in reducing not growing subsidies."

An $800 iPhone would also wreak havoc with Apple's margins. Apple's fourth-quarter iPhone margin guidance was conservative at 50%, but Piper Jaffray's Gene Munster said an $800 iPhone would give Apple an iPhone margin in the mid-70% range, versus the current 60%.

The analyst told TheStreet that a 20% margin shift is highly unlikely. "Apple's guidance backs into a 50% margin for the iPhone," he noted, in an email. "We think Apple's guidance is conservative, but not that conservative."