UBS Considers The Prospects Of A $1,000 iPhone

Apple Inc. AAPL shareholders and iPhone users are eagerly anticipating the release of the 10th anniversary iPhone 8 later this year. Unfortunately, UBS analyst Steven Milunovich predicts iPhone enthusiasts will have to pay a hefty price for the anniversary model.

While some people have speculated that Apple could choose to go the luxury route and price the standard iPhone at $1,000 or more, Milunovich believes Apple will stick to targeting the "luxury mass" market by keeping the new iPhone priced around $870.

Analyst Commentary

“We think an $870 price would be accretive to EPS but dilutive to gross margin, a dynamic Apple has said it would accept,” he explained.

UBS estimates iPhone 8 production costs will be $70–90/unit higher than the iPhone 7 Plus production costs.

Milunovich notes that the iPhone 8’s 5.8-in screen, which is smaller than SAMSUNG ELECTRONIC KRW5000 SSNLF’s S8 Plus’ 6.2in screen, will require Apple to be conscious of potentially losing market share if it prices the new device too high.

UBS predicts Apple’s entry–level OLED iPhone model will be priced no higher than $900, roughly in the same $840–$850 price range of Samsung’s most expensive model. Milunovich points out that it wouldn’t be surprising to see the 256 GB OLED iPhone break the $1,000 price barrier because the 256GB iPhone 7 Plus is already priced at $970.

UBS maintains a Buy rating on Apple and a $151 price target for the stock.

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