Will Wall Street ever fully grasp the massive scale of Apple’s iPhone cash machine?

Apple Online Store “The Apple iPhone is making the company far more cash than the Street generally believes, according to Societe Generale analyst Vicent Rech,” Eric Savitz reports for Barron’s.

“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.

23 Comments

  1. But.. but…. but….
    *Who is going to spend 600 for a phone???
    *We have years figuring out how to make a phone, PC guys won’t came out and figure this out….
    *How are we going to compete with them??? how are they going to compete with us…..
    and the list goes on…..

  2. Its not about the phone. The iPhone (and iPod Touch) platform will become the ‘standard’ for portable pocket computers. Along with the App Store, this platform will continue to grow and make boatloads of money for Apple and her shareholders.

  3. Ha! This is just the beginning. Wait until the iTablet has been out 2 years and all the services are running for it and ppl are jazzed and producing amazing creative content.

  4. This is just the iPhone this guy is talking about. I have Windows 7 RC installed in my Mac Pro and there is not one smidgen of equality between it and the super fast amazing Snow Leopard. Windows 7 might be prettier than previous Windows versions, but that is just about it. It is slow and it is nonintuitive. Also, in my install, it does not keep the time or my network settings when I boot to it from Mac.

    I already ripping the benefits of Apple’s efforts, and the software that I used has not yet been optimized for it. So the deference will be even more pronounced.

    Snow Leopard and what ever cat comes after that is leaving Windows way behind. Look how the Macintosh gets even more revitalized with time.

    Apple can no longer differentiate it self though hardware, so now it will do it through software, things are just getting started on the Mac platform.

  5. @ Mac-nugget,

    I think Win7 actually does look brighter and fresher than OS X. I know it’s the functionality that counts, but I wish Apple would do something to brighten it up; everything just looks so bland and gray.

  6. “The analyst sees the company producing adjusted EPS of $9.13 in the September 2009 fiscal year”

    Well, it may surprise some people, but if you have been following Apple’s last 4 conference calls, you’d know that they earned $9.18 a share, non-GAAP. And yes, when the analyst says, “adjusted EPS” he means non-GAAP.

    So, basically, this analyst is saying he finally figured out what non-GAAP is, seeing as nothing has actually changed, other than his tune. When will the others learn?

  7. It’s a shame that for AT&T;to agree to a subsidized $99 and $199 iPhone, they raised the data plan to $30 tacked on in addition to the phone plan. This makes me buy an iPod Touch and use a cheap call based phone. AT&T;shot themselves in the foot and doesn’t really want to compete in an agressive way. Volumes would make the leap for a $15 data plan.
    People are so ignorant to pay for such expensive subscriptions, whether they use them every month or not. The rollover minutes are the only real thing going for the consumer, and they pay thru the nose over the life of the plan.

  8. You might have something there. If Apple would would put some of its commission towards reducing the cost of a solid plan, I they and AT&T;could own the world.
    I don’t think they need to do that before they recoup their R and D costs. They’ve earned those.

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