Could a Cheaper iPhone Be On the Way?
Apple is widely expected to deliver its fourth-generation iPhone this summer, continuing the process of annual updates that it has for the last three summers. But in addition to unveiling a new high-end phone, there may be a low-end iPhone on the way that is even cheaper than Apple's current $99 offering.
Morgan Stanley analyst Katy Huberty issued a research note on Friday covering a variety of Apple (NASDAQ: AAPL) issues, but the big takeaway is Huberty believes that Apple will introduce a new model that's even more affordable than the current $99 iPhone 3G now on the market.
"The cost of device and service plan is currently the biggest barrier to incremental demand in both mature markets like the U.S. and emerging markets like China," she wrote.
She expects Apple to address that in June by introducing multiple new iPhone products. "We expect Apple to launch new iPhones in June that offer both a lower total cost of ownership and new functionality, potentially including gesture-based technology," she wrote.
Apple replaced the first-generation iPhone with the 3G in 2008, but when it released the 3GS in 2009, it left the 3G model on the market at a lower price point of $99 with a two-year contract. But Huberty seems to indicate multiple models are ahead for this summer's launch.
Huberty also shared some thoughts regarding the Apple iPad launch in March, adding that she expects Apple to announce additional content deals in late March when it begins shipping the iPad, and that demand will be better than expected.
"We see the iPad targeting the sub-$800 consumer notebook market, which equates to 30M annual units just in the U.S. (120M globally)," she wrote.
Morgan Stanley expects six million iPad shipments in this calendar year, much higher than the consensus view of three to four million. If that happens, the iPad will add $1.00 to Apple's year's earnings per share (EPS), raising it to $13.20 for the year.
Morgan Stanley has maintained its "overweight" rating for Apple's stock with a price target of $250. Huberty said that target could be adversely impacted if economic conditions impact iPhone sales, or positively impacted if Apple can find a way to reduce the cost of parts and make some gains with new carriers to sell the phone in even more markets.