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iPhone5 represents a big gamble by Apple

Monday, September 17 07:58:33

The iPhone alone accounted for 48 per cent of revenues last year at Apple and is projected to account for 55 per cent of revenues by 2014. Also, the iPhone enjoyed gross margins of 49-58 per cent from 2010-2012, compared to 23-32 per cent for the iPad. Those fat margins mean it may account for up to two-thirds of Apple's profits. JP Morgan recently upped estimates from 147 million sales in 2013 to 168 million, but Morgan Stanley estimates sales could hit 266 million. Upside sales surprises could drive shares much higher, but the stock could come under pressure if iPhone flops. It is, as one analyst put it, Apple's make-or-break product.

Six weeks ago, Stocktake noted that Apple shares tend to run up significantly in advance of major iPhone announcements. Shares are up 20 per cent since then. The aftermath? A "sell the news" reaction, according to Morgan Stanley, with the stock falling an average of 3.6 per cent in the week following the past four iPhone announcements. Within six months, however, shares averaged a 12 per cent advance, and 30 per cent within 12 months. This will be the fastest ever iPhone roll-out. It will be for sale in 100 different countries - including, crucially, China - across 240 of its 250 carriers by December. JP Morgan estimates iPhone 5 sales could add up to 0.5 per cent to US GDP.