Selling a much cheaper iPhone may pay off very well financially for Apple (AAPL).
"We believe the launch should be a notable tailwind for Apple, which we think could ship >35M units in the phone’s first year. At a blended average selling price of ~$450 or modestly higher given a higher base price, shipments at that volume could generate an additional ~$15-20 billion in annual revenues (approx. ~4-5% of total sales). Assuming standard product operating margins, it could contribute ~25-30 cents to EPS (~4-5% of total EPS)," said Evercore ISI tech analyst Amit Daryanani in a note to clients on Monday.
The analyst reiterated an Outperform rating and $210 price target on Apple.
Shares were up slightly in pre-market trading Monday to $155.
As Yahoo Finance tech editor Dan Howley reports, Apple's cheaper new iPhone is no slouch.
Priced at $429, the entry-level model boasts the same A15 Bionic processor as the more expensive iPhone 13. The iPhone 13 starts at $699. The iPhone SE also has a new camera and 5G connectivity.
But the new edition to the iPhone lineup — which is being designed primarily to bring people into the 5G era — does have a few tradeoffs. First, the SE lacks an edge-to-edge display. The screen is only 4.7 inches. And there is no facial recognization.
Despite the tradeoffs, Daryanani still thinks Apple has a major hit on its hands for a few reasons.
"First, though the starting price of the new SE is ~8% higher than the previous model at $429, the pricing remains on the affordable side. Second, the new SE is the first generation to offer 5G capability. While this may not be a headline selling point (Apple did not focus on emphasizing 5G capability during the product event), we think it could contribute to an uptick in unit volume. Third, we think a growing segment of the iPhone install base (e.g. iPhone 8 owners) are due for an upgrade," the analyst explained.
Brian Sozzi is an editor-at-large and anchor at Yahoo Finance. Follow Sozzi on Twitter @BrianSozzi and on LinkedIn.
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