“One of the reasons for Apple’s recent run-up to $500 is the growing optimism surrounding a potential deal with China Mobile,” Trefis Team writes for Forbes. “Following a recent meeting between the CEOs of the two companies, fresh rumors have erupted about Apple being close to a deal with the carrier. What has raised hopes further is China Mobile chairman Xi Guohua commenting that ‘both sides sounded keen’ during recent talks.”
“A deal with China Mobile could alone add tens of billions to Apple’s value,” Trefis writes. “In our analysis, we are taking a more conservative estimate of 100 million additional iPhones by 2020 considering the more competitive dynamics at the low-end in China. Additionally, accounting for the potential margin hit of a China Mobile deal, we assume the iPhone average pricing to decline from about $600 currently to $350 and margins from about 50% currently to less than 30% by the end of our forecast period (2020). This increases Apple’s value by $45 billion and our price estimate to $650, an upside of about 10% to our current $600 price estimate. ”
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