Milunovich: Low-cost Apple iPhone M to outsell full-priced Apple iPhone 5S

Milunovich: Low-cost Apple iPhone M to outsell full-priced Apple iPhone 5S
UBS analyst Steve Milunovich told his clients that the low-cost Apple iPhone, which he calls the iPhone M and we call the Apple iPhone 5C, will immediately outsell the full-priced Apple iPhone 5S. And while Milunovich expects the cheaper version of Apple's iconic smartphone to come out of the gate selling like hotcakes, it could still result in a huge drop in Apple's overall iPhone business.

Because the low-cost iPhone won't be launched until September, the analyst expects it to make up just 3% of Apple iPhone sales this year. But 2014 is a completely different matter. According to Milunovich, the iPhone M's first full year will result in 92 million units sold, or 53% of Apple's total iPhone sales next year. That would mean that the low-cost model would outsell the Apple iPhone 5S in 2014. And this is actually bad news for Apple and its stockholders.

With a lower profit margin than the phones that it would be replacing, the Apple iPhone 4 and the Apple iPhone 4S, introducing the low-priced Apple iPhone could actually be detrimental to Apple's 2014 earnings. He expects total iPhone earnings to be reduced by 1.4% next year or a drop of $1.6 billion in earnings. According to the analyst, Apple would be gaining market share at expense of its bottom line.

Despite cutting his 2014 earnings figure for Apple, Milunovich reiterated his "Buy" rating on the stock with a target of $500.

source: Barron's via BGR

Recommended Stories

Loading Comments...
FCC OKs Cingular\'s purchase of AT&T Wireless