updated 10:20 am EDT, Thu June 7, 2007
45m iPhone sales by 2009?
Apple is likely to sell 45 million iPhones by 2009, according to analysts from research firm Piper Jaffray, who raised their price target on Apple shares a whopping $20 -- from $140 to $160. "We believe Apple can sell 45 million iPhones in calendar year 2009," the analysts said. "While this may seem like a bold prediction, we believe a number in this area is not as far of a reach as some may think." Piper Jaffray analysts suspect that Apple's revenue growth could spike in 2009 based on "Booked" revenue metric versus the company's ratable model. Piper Jaffray maintains its 'Outperform' rating on Apple shares as the Cupertino-based Mac maker heads toward its planned June 29th iPhone launch date.
"Apple's iPhone revenue and associated COGS will be recognized ratably over a 24-month period. This will smooth out the revenue impact of iPhone unit sales, but we do expect Street focus will continue to be on iPhone units and 'booked' revenue."
Piper Jaffray senior analysts Gene Munster and Michael Olson expect ratable revenue growth of 17 percent for calendar years 2007 and 2008, with 19 percent ratable revenue growth in 2009. "Booked" revenue growth rates for calendar years 2007, 2008, and 2009 (including Apple TV) are estimated at 25 percent, 29 percent, and 43 percent, respectively. The analysts predict ratable year-over-year earnings-per-share growth of 21 percent in 2009 versus booked earnings-per-share growth of 43 percent.
"While Apple is taking a more conservative approach to iPhone rev recognition, we expect the Street will begin to recognize the magnitude of booked iPhone revenue and units, which would be positive for Apple. We are modeling 3.2 million phones in calendar year 2007 and 12.4 million for calendar year 2008 and do not see upside," the analysts said.
Bold iPhone sales prediction explained
Munster and Olson back their expectations of 45 million iPod sales in two years with the belief that Apple will seize 7 percent of handset market share in North America alongside 2.8 percent of the handset market in the rest of the world.
"We assume Street pricing on iPhone will have dropped to $338 by calendar year 2009 from $542 in calendar year 2007. Additionally, it is critical to keep in mind that the iPhone will be a combo device (iPod and mobile handset), which will attract more than just a mobile phone customer," said the analysts. "We believe we have factored cannibalization of iPod from iPhone into our model by lowering iPod growth rates from 35 percent or more year-over-year growth in fiscal year 2007 (and prior years) to 10-15 percent year-over-year in fiscal year 2008 and fiscal year 2009."
Piper Jaffray's senior wireless research analyst Mike Walkey dubbed the 45 million unit estimate "a stretch, but feasible if the product is a home run and the price comes down to a $300 price point." Walkey estimates that the RAZR sold 65 million units during 2006 or the second full year after a mid-2004 launch. While Motorola has stronger global distrubition than Apple and the RAZR retail price fell well below $300 by 2006, analysts point to Motorola's RAZR as one example of a successful product selling tens of millions of units in a 12-month period.
Walkey also believes the iPhone will have a somewhat limited impact on mobile handset manufacturers, as Motorola and Samsung have recently dominated sell-through trends at AT&T. Walkey also expects that the iPhone will not compete with more enterprise-based smartphones, but says the device will compete for higher-end consumer dollars which could result in lower sales for Palm and HTC.