Forget the iPhone 5, a Mid-Range iPhone Would Double Apple's (AAPL) Total Addressable Market... And It's Coming
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The iPhone growth engine is about to shift into high gear, commented analysts at Deutsche Bank.
The firm continues to expect 2 new iPhone SKUs - a midrange iPhone and iPhone 5 - to be introduced at Apple’s upcoming event. Specifically, they expect an iPhone 5 with aluminum uni-body construction, better camera and slightly larger screen size as well as a cost-down iPhone 4, or iPhone 4S. The latter should drive greater penetration into the mid-range smartphone market and "drastically expand Apple’s addressable market."
Apple can produce the midrange iPhone with a sub $150 bill-of-material cost, which is down from their prior estimate of about $165. An average selling price of $300-$350 would still be accretive to corporate margins and give the company the flexibility to drive volume, margins and share.
An aggressive push into the mid-range will essentially double the iPhone's total addressable market in the near term and "position it for more share gains in the 700M+ unit smartphone market by 2014," the analyst notes.
Despite the upcoming refresh the firm believes near term iPhone 4 demand is tracking ahead of expectation. In addition, "iPad manufacturing yields and volumes improved materially through 3Q which should support both margins and drive volume upside in the quarter."
Apple's international opportunities are also being under appreciated, the firm notes. "We believe Apple’s international channel and related penetration opportunities are under appreciated and we raise our iPhone, iPad and EPS estimates (DB at 82M iPhones in CY11 and 110M in CY12 vs. prior 79M and 105M, respectively)."
The firm boosted their price target on Apple from $500 to $530, which is 14x CY11 EPS ex-cash. They maintained their Buy rating.
For more ratings news on Apple click here and for the rating history of Apple click here.
Shares of Apple closed at $404.30 yesterday.
The firm continues to expect 2 new iPhone SKUs - a midrange iPhone and iPhone 5 - to be introduced at Apple’s upcoming event. Specifically, they expect an iPhone 5 with aluminum uni-body construction, better camera and slightly larger screen size as well as a cost-down iPhone 4, or iPhone 4S. The latter should drive greater penetration into the mid-range smartphone market and "drastically expand Apple’s addressable market."
Apple can produce the midrange iPhone with a sub $150 bill-of-material cost, which is down from their prior estimate of about $165. An average selling price of $300-$350 would still be accretive to corporate margins and give the company the flexibility to drive volume, margins and share.
An aggressive push into the mid-range will essentially double the iPhone's total addressable market in the near term and "position it for more share gains in the 700M+ unit smartphone market by 2014," the analyst notes.
Despite the upcoming refresh the firm believes near term iPhone 4 demand is tracking ahead of expectation. In addition, "iPad manufacturing yields and volumes improved materially through 3Q which should support both margins and drive volume upside in the quarter."
Apple's international opportunities are also being under appreciated, the firm notes. "We believe Apple’s international channel and related penetration opportunities are under appreciated and we raise our iPhone, iPad and EPS estimates (DB at 82M iPhones in CY11 and 110M in CY12 vs. prior 79M and 105M, respectively)."
The firm boosted their price target on Apple from $500 to $530, which is 14x CY11 EPS ex-cash. They maintained their Buy rating.
For more ratings news on Apple click here and for the rating history of Apple click here.
Shares of Apple closed at $404.30 yesterday.
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