The Upside Of Apple Making Its First $1,000 Phone

Goldman Sachs' Simona Jankowski maintains a Buy rating on Apple Inc. AAPL's stock with a price target boosted from $164 to $170 after taking a deep dive into what impact a $1,000 iPhone can have on the company's earnings and stock price.

According to the analyst, Apple's soon-to-be-released iPhone 8 (rumored to be named iPhone X) will mark the most anticipated iPhone launch since September 2014. Jankowski believes two phones will be released, the first a 128GB model for $999 and a 256GB model for $1,099.

Implications

Jankowski believes Apple's full-year fiscal 2018 iPhone unit shipments will be 243 million, which is mostly in line with the consensus estimate of 242 million. The iPhone 8 will "drive well over" 50 percent of total new iPhone shipments in the coming four quarters versus 51 percent share of the iPhone 7 Plus in the calendar fourth quarter of 2017 and 34 percent for the iPhone 6s Plus in its first four quarters.

Overall, Apple's blended iPhone average selling price will be $763 in the fiscal year, which is up 16 percent year-over-year and marks an acceleration from an 11 percent increase in the last "super cycle" in fiscal 2015.

As such, the analyst felt it prudent to boost her fiscal 2018 earnings per share estimate from $11.00 to $11.50 versus a consensus estimate of $10.40. Jankowski also raised her 2019 earnings per share estimates from $11.30 to $11.75, which is also above the Street's $10.99 per share estimate.

Finally, the higher average selling price will drive a "relatively modest" 40-basis-point headwind to iPhone gross margins in fiscal 2018.

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