“Rech contends that iPhone gross margin is already running at about 60%, compared to 33% for the rest of Apple’s activities. He sees iPhone accounting for 28% of adjusted revenue in 2009, growing to more than 40% in 2012. Even if iPhone gross margin drops to 50%, he says, Apple’s reported gross margin will rise from 36% in fiscal 2009 to 39% in 2012 due to a shift in product mix,” Savitz reports.
“The analyst sees the company producing adjusted EPS of $9.13 in the September 2009 fiscal year, $11.16 next year and a whopping $13.83 in fiscal 2011. On a reported basis, he expects $5.42 this year, $7.92 next year and $10.18 in FY 2011,” Savitz reports. “Rech today raised his target price on the stock to $255, from $170.”
Savitz reports, “The analyst contends that the fat profitability of the iPhone gives the company substantial room to cut prices, a factor he says poses a risk for Nokia, which he already rates a Sell.”
More in the full article here.