In recent entries I asked: Can the iPhone reach 10% of the world’s 3G subscribers? and Can iPhone reach 20% of global smartphone market?
These were rhetorical questions designed to demonstrate that a growth rate of 50% (compounded) over three years was clearly possible through reduction to absurdity of alternative scenarios.
The question of iPhone as iPod vs. iPhone as Mac businesses is at the crux of any investment in Apple today and the key strategic question facing Apple and all its competitors. Anyone holding or considering buying AAPL shares should answer this question for themselves.
To the top-down market share scenarios above I add the following, more direct, signals Apple has made regarding their iPhone-for-all strategy:
Susquehanna Financial’s Jeff Fidacaro: To $335 from $325.
Kaufman Bros.’ Shaw Wu: To $340 from $320.
Piper Jaffray’s Gene Munster: To $348 from $340.
Caris and Co.’s Robert Cihra: To $325 from $310.
Morgan Stanley’s Katy Huberty: To $332 from $310.
International Strategy & Investment Group’s Abhey Lamba: initiate with $320.
Cowen’s Matthew Hoffman: initiate with $326.
At yesterday’s closing price Apple was trading at a 12-month trailing P/E multiple of 23 despite revenue growth that may exceed 50% and EPS growth that may exceed 70%.
Using the highest target of $348 price target as an example, it prices the shares at a P/E of less than 30 times the most recent 12-month earnings which does not take into account the contributions from the iPad.
In Japan’s second cell-phone merger this month, Fujitsu and Toshiba said Thursday they will merge their handset operations … NEC, Casio Computer and Hitachi merged their phone units earlier this month.
via Fujitsu and Toshiba to Merge Cellphone Units – DealBook Blog – NYTimes.com.
Mergers usually happen in a mature industry when there is excess capacity and decreasing growth. In the mobile phone market we’ve seen several companies disappear or merge over the past decade:
- Motorola tried but failed to get itself acquired.
But we’ve just seen forecasts where the smartphone market is growing and is expected to continue growing at 40%. Why is there consolidation in a growing market?
“We have long maintained that the company’s ponderous corporate culture would eventually find its footing, but with competitors attacking fiercely at both the low and high end, deterioration in its core European market, and a lengthening timeline for Symbian^3, which may not live up to expectations anyhow, shares will plunge well below recession lows,” he warns.
via Nokia: Charter’s Snyder, Long-Time Bull, Throws In The Towel – Tech Trader Daily – Barrons.com.
But at least Nokia management can take comfort in having a higher P/E ratio than Apple.
As a footnote to the unlocked iPhone 4 story, it’s worth noting that the average Apple store pricing for UK and France is around $824 (assuming equal blending between the two countries and between the two models). Excluding corresponding VAT leads to an approximate ASP of $695.
Operators probably get a slightly better price so my estimate for the iPhone 4 ASP of $600 seems reasonable with potential upside based on product and regional mix.