Piper Jaffray ups Apple target to $250, sees sales of 45M iPhones in 09

Posted:
in iPhone edited January 2014
Investment bank Piper Jaffray on Thursday maintained its extremely bullish outlook Apple Inc., raising its price target on shares of the company once again to $250 from $222, saying it remains confident in predictions that iPhone sales will increase to 45 million a year by calendar year 2009.



"We have constructed a model that we believe reflects the impact of iPhone booked revenue and AT&T revenue share in the coming years," analyst Gene Munster wrote in a note to client investors. "Based on this model, we continue to believe that the iPhone and the revenue share agreement will be more impactful in '09 and beyond than currently factored into consensus thinking."



The analyst sees iPhone sales of 3.4 million, 12.9 million, and 45.0 million in calendar years 2007, 2008, and CY09, respectively. While his 2007 and 2008 estimates are in line with the general consensus on Wall Street, his aggressive forecast for 2009 is based on the belief that the average price of the touch-screen handsets will fall gradually over the next two years, from $400 currently to $370 by the end of 2008 and $300 by the end of 2009.



Based on data from Apple's recently-reported September quarter, Munster believes the current revenue sharing agreement between AT&T and Apple requires a revenue share payment of $18 per sub per month to Apple, which is "materially higher" than his original expectation of approximately $6.50 per sub per month.



"We are taking a conservative approach to the revenue share agreement and assuming that by the end of 2009 the monthly payment to Apple will be $9.00 per sub per month," he wrote.



Based on these assumptions, the analyst said recognized revenue in 2009 from the iPhone AT&T revenue share agreement would total approximately $4.8 billion. Even assuming a gross margin of 80 percent on the monthly payments from AT&T, operating income resulting from the AT&T revenue sharing agreement would be $3.9 billion in 2009, he said.



"In other words, revenue from AT&T payments in 2009 would add 60 percent to Apple operating income if we applied an 80 percent gross margin to AT&T revenue share revenue and assumed no additional opex from AT&T revenue share," Munster wrote. "Our model takes a more conservative approach and assumes AT&T revenue share revenue is run through the model at normal corporate gross and operating margins."



In his note to investors Thursday, the Piper Jaffray analyst also pointed out that iPhone is currently sold at just 2000 distribution points, which are comprised of approximately 200 Apple retail stores and 1,800 AT&T stores. Given that Apple maintains over 40,000 distribution points for its iPod digital media players, he believe the Cupertino-based company could easily expand distribution of iPhones in every country that has iPhone availability.



"This would be made possible by the fact that the iPhone is activated using iTunes on a user's personal computer -- not through in-store activation," he wrote. "As such, buying an iPhone is equally as simple as buying an iPod from a logistical standpoint. Therefore, it is possible for Apple to rapidly expand iPhone distribution throughout the world in countries with iPhone availability, which would likely serve as another catalyst to iPhone sales."



While the timing of Apple's roll-out of the iPhone beyond Apple and AT&T retail stores is difficult to pinpoint, Munster believes there will clearly be an appetite from other retailers whenever that time comes.



To help drive sales going forward, the analyst expects Apple will offer new and innovative iPhone features, like 3G internet connectivity and possibly GPS navigation, at the lower price points.



Shares of Apple were trading up $0.99 or just over half a percent to $185.93 in early morning trading on the Nasdaq stock market.
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Comments

  • Reply 1 of 54
    Eh, 45M is a little hard to believe, in my opinion, more specifically that a price shift to $300 for an "entry-level" iPhone is going to make THAT big of a difference. Extrapolating the H2'07 numbers for a full year, 2007 may have around 7M phones. Then, they basically double in '08 to 12M? Then quadruple in '09 to 45M?? I don't think so...



    Apple will reduce the price of the iPhone and make it much easier to join the ecosystem... however, the cost of the iPhone is unimportant compared to AT&T's service cost. If that remains as-is, even the cheapest plan ($1440 over two years) will total $1740 rather than $1840... a cost difference of about 5.5%.



    The iPhone is an investment. Investments are not easy things to make, especially when they cost around $2000. Chipping a hundred bucks or so off that price isn't going to make a big difference, whereas with an iPod, if you reduce the price from $400 to $300, you're saving 25%.



    Basically what I'm saying is that if you can't afford $1840, you can't afford $1740.



    Oh, and I highly doubt Apple ever pricing the iPhone at $370.



    Analysts.



    -Clive
  • Reply 2 of 54
    crees!crees! Posts: 501member
    Eventhough I bought stock when it was well under $100, I think I'll suck it up and buy some more.
  • Reply 3 of 54
    jeffdmjeffdm Posts: 12,951member
    Quote:
    Originally Posted by AppleInsider View Post


    Investment bank Piper Jaffray on Thursday maintained its extremely bullish outlook Apple Inc., raising its price target on shares of the company once again to $250 from $222, saying it remains confident in predictions that iPhone sales will increase to 45 million a year by calendar year 2009.



    I think it's a nice product, I really do plan to get one eventually, but that's an extraordinarily quick acceleration for just about anything. It looks like it took five years for iPod sales to exceed 45M in one year, that was a wonderkind story, and these guys think it's going to happen with the iPhone line in half that time?
  • Reply 4 of 54
    g5mang5man Posts: 91member
    Quote:
    Originally Posted by JeffDM View Post


    I think it's a nice product, I really do plan to get one eventually, but that's an extraordinarily quick acceleration for just about anything. It looks like it took five years for iPod sales to exceed 45M in one year, that was a wonderkind story, and these guys think it's going to happen with the iPhone line in half that time?





    Once you have one you will understand. Also keep in mind that everyone needs a cell phone vs not everyone wants an iPod.



    There have been several surveys that indicate accelerated growth with a drop in price.
  • Reply 5 of 54
    Quote:
    Originally Posted by JeffDM View Post


    I think it's a nice product, I really do plan to get one eventually, but that's an extraordinarily quick acceleration for just about anything. It looks like it took five years for iPod sales to exceed 45M in one year, that was a wonderkind story, and these guys think it's going to happen with the iPhone line in half that time?



    Well, first people needed to be convinced they needed an iPod.

    Everybody already has a cellphone, so making the leap to iPhone isn't as difficult.



    Second, the phone market is a lot bigger than the music player market.



    Third, Apple has established themselves as a top-tier brand and everybody has heard of them.

    This wasn't the case 4-5 years ago when consumers were skeptical of Apple.
  • Reply 6 of 54
    Quote:
    Originally Posted by AppleInsider View Post


    To help drive sales going forward, the analyst expects Apple will offer new and innovative iPhone features, like 3G internet connectivity and possibly GPS navigation, at the lower price points.



    GPS is the killer app I'm waiting for. Apple could dominate yet another product segment.

    Apple should make a GPS module that can sit on your dashboard and send the coordinates via bluetooth to the iPhone which displays the slick mapping interface. They should also create a mapping app to add to iLife.
  • Reply 7 of 54
    jeffdmjeffdm Posts: 12,951member
    Quote:
    Originally Posted by g5man View Post


    Once you have one you will understand.



    Do you understand how lame and cultish that statement sounds? It also assumes that I haven't tried it. That's not true.



    Quote:
    Originally Posted by Johnny Mozzarella View Post


    Also keep in mind that everyone needs a cell phone vs not everyone wants an iPod.



    Even for a phone, it's not that common. I'm not sure if such acceleration has ever happened with any phone.
  • Reply 8 of 54
    Quote:
    Originally Posted by JeffDM View Post


    Do you understand how lame and cultish that statement sounds? It also assumes that I haven't tried it. That's not true.







    Even for a phone, it's not that common. I'm not sure if such acceleration has ever happened with any phone.





    Fair enough. Why have you not bought one yet? What do you not like about it?
  • Reply 9 of 54
    jeffdmjeffdm Posts: 12,951member
    Quote:
    Originally Posted by Johnny Mozzarella View Post


    GPS is the killer app I'm waiting for. Apple could dominate yet another product segment.

    Apple should make a GPS module that can sit on your dashboard and send the coordinates via bluetooth to the iPhone which displays the slick mapping interface. They should also create a mapping app to add to iLife.



    I think that can be a niche that can be filled by a third party product & third party software, assuming Apple offers a way for third parties to connect through the Bluetooth radio.
  • Reply 10 of 54
    satchmosatchmo Posts: 2,699member
    Are you sure this guy meant 45 million units or 45M in revenue?



    The iPhone will do well, but 45M units sound completely out of whack...maybe more like 4.5 M units.
  • Reply 11 of 54
    jeffdmjeffdm Posts: 12,951member
    Quote:
    Originally Posted by g5man View Post


    Fair enough. Why have you not bought one yet? What do you not like about it?



    I'm not even halfway through a contract with another company, and I didn't want to buy a first-generation product. The third party software concern may be alleviated, and by the time my contract comes up, I hope there will be faster cellular networking.



    Even though those concerns will likely evaporate before 2009, I'm still skeptical of the 2009 estimates. It's not impossible, but they seem unrealistic.



    Quote:
    Originally Posted by satchmo View Post


    Are you sure this guy meant 45 million units or 45M in revenue?



    The iPhone will do well, but 45M units sound completely out of whack...maybe more like 4.5 M units.



    In a year? I think that's low-balling it, if iPod sales held steady then that rate is probably already being achieved. I think 4.5M units in a quarter would be realistic growth.
  • Reply 12 of 54
    Quote:
    Originally Posted by JeffDM View Post


    I'm not even halfway through a contract with another company, and I didn't want to buy a first-generation product. The third party software concern may be alleviated, and by the time my contract comes up, I hope there will be faster cellular networking.




    Bing



    There are millions like you. I have heard it over and over again and surveys confirm it. There are those who don't mind buying the first generation and are already ATT subscribers like myself. There are those who can not afford buying one right now. There are those are waiting for their contracts to expire because they don't want to pay the $150 termination fee. And there are even bigger numbers of those who just want more features like bigger memory, better services.



    When you combine all those categories I think you will see the numbers climb rather quickly.
  • Reply 13 of 54
    solipsismsolipsism Posts: 25,726member
    Quote:
    Originally Posted by JeffDM View Post


    Even though those concerns will probably totally evaporate before 2009, I'm still skeptical of the 2009 estimates. It's not impossible, but they seem unrealistic.



    ? 120M iPods sold in 6 years vs. 1,000M cellphones sold this year alone.

    ? The iPod has already laid the foundation.

    ? There are 200 Apple Stores now and 1800 AT&T kiosks showcasing the iPhone.

    ? Apple has become iconic again

    ? There are 3 more countries selling the phone next month and more coming next year.

    ? The iPhone uses Windows iTunes from the start. (ie: It's not just an Mac-related product)

    ? Jobs was told that he couldn't make a phone His ego alone will push the iPhone to record sales

    ?*Like you, some people are still under contract

    ? Like you, some stay away from first generation products

    ? The SDK will increase sales

    ? 2G iPhone with 3G will increase sales

    ? The UI f@#kin rocks
  • Reply 14 of 54
    Quote:
    Originally Posted by satchmo View Post


    Are you sure this guy meant 45 million units or 45M in revenue?



    The iPhone will do well, but 45M units sound completely out of whack...maybe more like 4.5 M units.



    Golly u guys are funny ... i come here to get informed a little and get a good chuckle at the same time ... way to go Kasper ...i love your site ,,,he meant 45 million units lol. I bought my stock at $30 a share,, giggle giggle,,i ain't sellin till Steve screws up severely.





    my wife hates Apple so much she is putting in a new 70 thousand dollar kitchen. She might hate hearing the subject come up 5 times a day , but she loves spending the money ,,, giggle giggle
  • Reply 15 of 54
    cameronjcameronj Posts: 2,357member
    Quote:
    Originally Posted by Clive At Five View Post


    Eh, 45M is a little hard to believe, in my opinion, more specifically that a price shift to $300 for an "entry-level" iPhone is going to make THAT big of a difference. Extrapolating the H2'07 numbers for a full year, 2007 may have around 7M phones. Then, they basically double in '08 to 12M? Then quadruple in '09 to 45M?? I don't think so...



    Your post missed a couple of big (and obvious) things. In the paragraph above, you fail to note that the iPhone will go from a USA only product (potential market of ATT users - 40 million or so) to a worldwide product. Each large country (England, France, Germany all count, and many more will follow) it launches in essentially adds another USA sized market to sell to.



    Not to mention that 2007, with 7M, is only half the year for sales. So a whole year next year, with a potential market probably extending close to 200M, compared to this year where you have 40M for 6 months + another 50-60M (guessing) for just 2 months... gee, doubling 7M doesn't seem so crazy now, does it?



    Quote:

    Apple will reduce the price of the iPhone and make it much easier to join the ecosystem... however, the cost of the iPhone is unimportant compared to AT&T's service cost. If that remains as-is, even the cheapest plan ($1440 over two years) will total $1740 rather than $1840... a cost difference of about 5.5%.



    Very logical of you, but wrong.



    You don't really think that cell phone buyers consider that they are investing that much do you? And really, they aren't - because they are going to have a cell phone plan anyway, so upgrading from that crappy RAZR to an iPhone really does cost them just the price of the phone. Yeah you add the data plan, but given how useful the iPhone is, $20 per month really isn't much.



    Quote:

    Oh, and I highly doubt Apple ever pricing the iPhone at $370.



    That's a weighted average price. Apple will not keep just 1 model of the phone forever.
  • Reply 16 of 54
    Quote:
    Originally Posted by Johnny Mozzarella View Post


    GPS is the killer app I'm waiting for. Apple could dominate yet another product segment.

    Apple should make a GPS module that can sit on your dashboard and send the coordinates via bluetooth to the iPhone which displays the slick mapping interface. They should also create a mapping app to add to iLife.



    That would be great!!!!
  • Reply 17 of 54
    Quote:
    Originally Posted by cameronj View Post


    Your post missed a couple of big (and obvious) things. In the paragraph above, you fail to note that the iPhone will go from a USA only product (potential market of ATT users - 40 million or so) to a worldwide product. Each large country (England, France, Germany all count, and many more will follow) it launches in essentially adds another USA sized market to sell to.



    Yes, I realized that I neglected to add worldwide sales after I posted, but I still don't think 45M is even plausible.



    Quote:
    Originally Posted by cameronj View Post


    Not to mention that 2007, with 7M, is only half the year for sales. So a whole year next year, with a potential market probably extending close to 200M, compared to this year where you have 40M for 6 months + another 50-60M (guessing) for just 2 months... gee, doubling 7M doesn't seem so crazy now, does it?



    I accounted for the half year. 2007 total sales are projected at 3.4 million. I figured with a launch in jate June, double the number and then some, thus 7M units. I could see it feasible for Apple to sell 12 million units in 2008, but unlikely. I'd be willing to estimate as much as 75% growth year-over-year which gives 12.25M for 2008 but just 21.4M for 2009. Still a very large number if you ask me... for a total of 5% of the already-established cell phone market? That's very impressive.



    Quote:
    Originally Posted by cameronj View Post


    Very logical of you, but wrong.



    You don't really think that cell phone buyers consider that they are investing that much do you? And really, they aren't - because they are going to have a cell phone plan anyway, so upgrading from that crappy RAZR to an iPhone really does cost them just the price of the phone. Yeah you add the data plan, but given how useful the iPhone is, $20 per month really isn't much.



    I consider the entire price. If you (or anyone else) doesn't, I would consider it poor planning and pseudo reckless spending. Before I signed up for high-speed internet (I'm newly out on my own) I calculated how much it would be a year and asked myself if it was worth it to have fast internet at that price. I've been doing the same with my phone which will soon expire on my parents' plan. It's not even that I'm a stingy bastard. I'm just a careful spender.



    And it shouldn't just apply to those newly on their own. If my wife and I were on a regular AT&T family plan right now, we'd be paying $60/month. Maybe a little more for a text message apckage. If we were going to switch to an iPhone plan, it would be over $40 more. PER MONTH. For two years, that's a difference of almost a thousand dollars, which is a significant enough portion of my income to say it's not worth it. (This is where unlocking could come into play nicely, but that's another argument.)



    -Clive
  • Reply 18 of 54
    Gene increases the aapl stock price to $250 for 2008. I don't have a problem with that. I predicted $200.00 by Thanksgiving this year back when aapl was swooning at $135.00 on September 6th. Let's see stock split, or how about a dividend with 15 billion in cash and no debt outstanding. Leopard is OK but not much greater than Tiger. Let's see what the stores look like Friday night. Amzn knows how to make sales. But they don't know how to make a profit. Amzn is a nice $25.00 stock. The Amzn MP3 download sales will help keep the itunes site from crashing. More ipods will be sold. Last quarter aapl sold their 120 millionth ipod. They sold 10,200,000 ipods in the last quarter. That's over 120,000 per day now. The ipod touch is predicted to be this years "tickle me Elmo". The portable Macs are hot on the college level. The ipod is the number one brand for teenagers in England. The iphone is revolutionary. It does not sell at a discount. Plus aapl gets a cut from the carrier. Nokia expects that the mobile device market volume will be approximately 1.1 billion units in 2007, up from the approximately 978 million units Nokia estimated for 2006. That includes ipods and iphones. Steve jobs says aapl will sell 10 million iphones by the end of 2008. But, 45 million in 2009.....WOW what a number.
  • Reply 19 of 54
    Why on earth would you want a split or a dividend? This is a growth stock right now. A split is pointless and Apple needs to keep investing in innovation, not paying dividends. It's already done right by its shareholders via the stock price, so there is no need to pay dividends.



    Quote:
    Originally Posted by artman1033 View Post


    Gene increases the aapl stock price to $250 for 2008. I don't have a problem with that. I predicted $200.00 by Thanksgiving this year back when aapl was swooning at $135.00 on September 6th. Let's see stock split, or how about a dividend with 15 billion in cash and no debt outstanding. Leopard is OK but not much greater than Tiger. Let's see what the stores look like Friday night. Amzn knows how to make sales. But they don't know how to make a profit. Amzn is a nice $25.00 stock. The Amzn MP3 download sales will help keep the itunes site from crashing. More ipods will be sold. Last quarter aapl sold their 120 millionth ipod. They sold 10,200,000 ipods in the last quarter. That's over 120,000 per day now. The ipod touch is predicted to be this years "tickle me Elmo". The portable Macs are hot on the college level. The ipod is the number one brand for teenagers in England. The iphone is revolutionary. It does not sell at a discount. Plus aapl gets a cut from the carrier. Nokia expects that the mobile device market volume will be approximately 1.1 billion units in 2007, up from the approximately 978 million units Nokia estimated for 2006. That includes ipods and iphones. Steve jobs says aapl will sell 10 million iphones by the end of 2008. But, 45 million in 2009.....WOW what a number.



  • Reply 20 of 54
    Quote:
    Originally Posted by moracity View Post


    Why on earth would you want a split or a dividend? This is a growth stock right now. A split is pointless and Apple needs to keep investing in innovation, not paying dividends. It's already done right by its shareholders via the stock price, so there is no need to pay dividends.





    Because aapl has become a cash cow.....MOO
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