Wall Street expects iPhone 4 to impress, boost sales for Apple
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Analysts said they were satisfied by Apple's presentation, despite the fact that many surprises were previously spoiled by a handful of high-profile leaks, revealing the new design of the latest iPhone. But those public teardowns of inoperable hardware couldn't show off some of the handset's features, including the new Retina Display and the incorporation of a gyroscope.
Analyst Gene Munster said Apple's latest iPhone is "significantly more advanced than the next best alternative." He expects Wall Street's current average quarterly iPhone sales estimates of 8.7 million to move higher after the debut of iPhone 4.
Munster said that the iPhone continues to take market share from other device categories, as Apple's handset gains more features and becomes more capable.
"The gee-whiz feature of iPhone 4 is FaceTime (videochat), adding yet another feature which historically was tied to a personal computer," he said. "iPhone 4 also adds an HD video camera, iMovie for the iPhone and the ability to run multiple apps at the same time, collectively creating an integrated experience that used to require multiple devices. The bottom line is the iPhone is taking unit and dollar share from other device categories."
Because he believes iPhone 4 is the most significant improvement to the hardware line yet, Munster said more users will be inclined to upgrade than opted with last year's iPhone 3GS.
"William Tell would hate this Apple," analyst Yair Reiner wrote, referring to the folk hero of Switzerland.
Despite the "dribble of leaks" before Monday's keynote, he said, Apple's latest iPhone "catapults the smartphone category forward along every axis of relevance to consumers: OS sophistication, speed, battery life, display resolution, video connectivity and camera quality. If products like the HTC Incredible demonstrate that Apple's competitors have significantly improved their game, the iPhone 4 suggests the stronger competition has sparked an almost fierce level of innovation at Apple."
Reiner also provided details on the new 5 megapixel camera in the iPhone, capable of recording 720p video. Citing checks with suppliers, he said the new module is "orders of magnitude more sophisticated than anything previously attempted in a smartphone."
After its debut in the U.S., France, Germany, the U.K. and Japan on June 24, iPhone 4 will quickly ramp up to 87 total countries by September. This quicker-than-expected global launch caused Reiner to raise his estimates for Apple's third fiscal quarter of 2010 to $14.8 billion in revenue and $3.07 in earnings per share, up from $13.6 billion and $2.71, respectively.
Analyst Shaw Wu said the new form factor and software will serve as a "powerful catalyst" for sales of iPhone 4. He said the price points of $199 for 16GB and $299 for 32GB are aggressive.
Wu said the most intriguing new features of Apple's latest handset are FaceTime video chat, the new HD screen dubbed Retina Display, folders in iOS for better management of applications, and the incorporation of a gyroscope which will lead to a "new generation of software, particularly gaming, featuring 6-axis motion control."
Wu has modeled sales of 8.05 million iPhones for the June quarter, a number he said is likely conservative. He said he will modify his estimates once he can see how iPhone 4 production is coming along through supply chain checks.
J.P. Morgan Research
Mark Moskowitz said iPhone 4 offers "suitable advancements," which will help to assure that Apple will maintain its leadership role in the smartphone market. He said key features are FaceTime, Retina Display, multitasking, and the introduction of iBooks and iMovie applications for the iPhone.
"In the next 12 months, we expect Apple to benefit from the churn effect," Moskowitz wrote. "In other words, we think the new iPhone 4 stands to increase adoption rates by new customers and also accelerate rates from existing customers. The new features, particularly the FaceTime video chat, will likely reassert the iPhone as the must-have device for users seeking advanced wireless handset connectivity solutions."
He said that some investors may be disappointed that Apple maintained the same $199/16GB and $299/32GB prices and did not decrease the average selling price of the iPhone, but he believes the advanced features in iPhone 4 offset that. He said it is the hardware itself and the App Store that sell the iPhone, not pricing.
Caris & Company
Analyst Robert Cihra said although Apple did not announce a Verizon-compatible CDMA phone on Monday, its inevitable announcement is a "when," not "if." The benefit from a stock perspective, he said, is that Apple continues to have a "back-pocket catalyst" which it will introduce one day.
He has raised his iPhone estimate for the June quarter to 8.7 million, up from 7.7 million. He noted that sales of 41 million iPhones in calendar year 2010 would give Apple just 17 percent of the smartphone market and 3 percent of the cell phone market, leaving plenty of room to grow.
Cihra also took the opportunity to increase his iPad estimates for the year, and now expects Apple to sell 11 million devices in calendar year 2010. That nearly doubles his previous estimate of 6 million for the year. Apple did not provide new iPad estimates on Monday, but instead reiterated that the device had sold 2 million in less than two months.
Caris & Company has raised its price target for Apple stock to $325, up from $310.
Mike Abramsky said iOS is more than just a renaming of its mobile operating system, it's a continued "assault" on "dominating personal computing."
"Apple now brings iOS's simplicity, user experience, iTunes integration, developer momentum and cross-platform across all future Apple mobile devices (expects to ship 100 million 'iOS devices' in June), gaining scale as smartphones/iPads outsell PCs," Abramsky wrote.
He said that Apple's closed system works to its advantage, allowing it to develop "super apps" like iMovie that take full advantage of Apple's vertical integration of hardware and software. He expects Apple to release more advanced applications on the App Store in the future.
RBC estimated that between 18 million and 20 million iPhone 2G and 3G owenrs are upgrade eligible, and a survey of 1,000 respondents found that 50 percent were "likely to upgrade." Abramsky said that equates to between 9 million and 10 million likely iPhone 4 sales based on upgrades alone.
Analyst Brian Marshall said he was "thoroughly impressed" by the Steve Jobs keynote on Monday. But he noted there weren't any "material surprises," thanks in large part to a number of high-profile leaks prior to the Worldwide Developers Conference.
"Nonetheless, we walked away even more confident in our iPhone estimates (8.8mil, 40.0mil and 50.0mil for June '10, CY10 and CY11 respectively)," Marshall wrote. "In our view, we believe the potential is great for the gross margins on the iPhone 4 to exceed the margins on the iPhone 3GS due to higher levels of integration and cost downs of components."