updated 03:15 pm EDT, Mon June 23, 2008
Pac Crest on iPhone 3G
The iPhone 3G should be profitable for Apple, but not to the degree it could otherwise have been, writes Andy Hargreaves of Pacific Crest. The analyst is raising his price target for Apple from $225 to $235, and his projected FY09 EPS from $6.20 to $6.55; this is due to expected to the expected volume of 3G sales, which will be aided by availability in 70 or more countries by the end of 2008. The phone is also being subsidized in the case of most shoppers.
The subsidy is at the root of the problem, says Hargreaves. While it should increase the number of unit sales, helping short-term cash flow, it will only offset the loss of revenue sharing collected from carriers and first-generation iPhone owners. The carriers, in fact, may suffer a fair amount in the short-term, as their subsidy per phone may be as high as $350, $25 more than estimated by Oppenheimer's Yair Reiner.
Hargreaves is projecting FY09 iPhone shipments of 15.5 million, with a potential of "significant upside."