Why Samsung Phone Prices Make The '$1,000 iPhone' Unlikely For Apple

Investors concerned with a potential $1,200 price on the upcoming release of Apple Inc. AAPL's iPhone 8 may now be able to breathe a sigh of relief, at least according to UBS's Steven Milunovich.

Samsung Electronic SSNLF released its Note 8 smartphone, which costs $950 for the 64GB version, Milunovich said in a research report. This is important because Apple typically prices its own flagship "Plus" iPhone at a slight discount to the Note, so a $900 price tag on the base OLED iPhone 8 follows logically.

Apple could proceed with two different models, one with a 64GB storage and the other with 256GB storage, the analyst continued. But it is not clear if Apple will upcharge $100 for the higher storage model as it typically does or introduce a higher price target.

Also, Apple will introduce a new LCD model, which could sell in the typical $550 to $650 range. Any additional price cuts would send a clear signal that the company wants the OLED model to be the undisputed flagship phone, Milunovich added.

Should Apple decide to slash the price on its LCD models by $100, its average selling price per iPhone will be just over $700. This would also imply a flat to slightly negative gross margin. If there are no price cuts on the LCD phone and the OLED phone is priced at $900, then the company can earn $11.30 per share in fiscal 2018, representing an upside to the analyst's current $11.15 per share estimate.

Milunovich maintains a Buy rating on Apple's stock with an unchanged $180 price target.

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