Goldman: Four Reasons To Be Bullish On Apple's iPhone

Goldman Sachs is positive on Apple (NASDAQ:AAPL) after a recent handset branding survey conducted in the US, UK, China, and India. Even with the survey having taken place prior to the announcement of iPhone, there are four key positive takeaways for Apple:

1) The number of potential iPhone buyers is equivalent to 75% of the installed base of current iPod owners, with just under 1/2 of the potential buyers coming from respondents who have never owned an iPod.

2) Similarly, in the US, 71% of respondents indicated interest in a potential Apple mobile phone.

3) In the US, Apple ranked as the number 4 most desired multimedia handset brand - again, coming before iPhone was even announced.

4) Some of the concerns about the unwillingness of consumers to switch carriers to get the handset they want seem misplaced, with 30% of UK respondents and 15% in the US suggesting that they would switch.

The buying intention survey gives the firm greater confidence in their initial iPhone forecast of 4 mn units in CY2007 and 10.5 mn in CY2008, driving Apple's growth to 20% levels, biased still to the upside. In fact, their preliminary base case analysis, assuming 25% video iPod cannibalization in calendar 2007 and 50% in 2008, concludes that iPhone alone could add an incremental 400-500 bp to Apple's revenue growth in those two years.

GSCO thinks that iPhone starts the next big growth phase for Apple, making it a core holding, and believes that the stock should be bought on dips prior to the product's launch in June.

Notablecalls: Not actionable but 'good to know' category.

Comments

[Malkiel:]

I mentioned this in response to an earlier article of this type that some Mac publications are speculating that the iphone may actually appear to its potential user base as more of a handheld mobile pc than a phone. If we start to look at it that way, then we may draw different conclusions about its perception in the market...

2007 Feb 26 12:53 PM