Having digested Apple's iPhone 3G announcements from Monday, analysts at both Citigroup and Lehman Brothers have sharply raised their 12-month price targets for the electronics maker.
As a result, the analyst boosted his fiscal 2009 and fiscal 2010Â free cash flow estimates from $7.4B andÂ $8.9B to $9.3B and $10.2B, respectively, but noted the change in carrier model will likely have little net impact to his already above-consensus GAAP per-share earnings estimates. The shift in carrierÂ payments to the point of sale should, however, boosts fiscal 2009 and fiscal 2010Â revenue by $1.4B-3.2B, he said. Â
Gardner also cited fellow Citi wirelessÂ analyst Michael Rollins, who believes that AT&T is paying AppleÂ $220-$270 more for the 3G iPhone than the Net Present Value of allÂ revenue sharing payments related to the original iPhone. "AT&T obviously believes thatÂ the higher upfront investment will pay off in higherÂ subscriber adds, higher average revenue per unit, and lower churn," he said.
Separately, Lehman Brothers analyst Ben Reitzes also raised his price target on Apple shares to $234 from $202, saying he viewed the company's announcements Monday as positive for the stock due primarily to the new $199 price point for the 3G iPhone and its ability to drive multiple revenue streams within the company
"We believe weakness in the stock initially was a combination of a 'sell on news' reaction and some concerns about the product shipping about 2 weeks later than we expected," he wrote in a note to clients. "Also, we believe there is some confusion about the altered iPhone business model. We would use weakness in shares to accumulate the stock given Apple is creating a top of the line mobile community with multiple revenue streams that we believe should benefit investors over the long-term."
Given limited availability of the first-generation iPhone and the fact that Apple has pushed out the first shipments of its new iPhone to July, Reitzes now estimates the company will sell just 710,000 iPhones during its current fiscal third quarter of 2008 scheduled to end later this month. However, he's estimating sales of 3.6 million 3G iPhones during the fiscal fourth quarter ending September and 23 million during fiscal 2009.
"We believe focusing on the minutiae around shared average revenue per unit streams (just like earlier this year) misses the big picture impact of the significant growth in iPhone units and the ripple effect on the rest of the company," he wrote.