iPhone Demand Surprises Even Apple Bulls

According to checks in the Western United States, Apple (AAPL) stores continued to have lines on Monday afternoon, up to as many as 150 people long, for the new iPhone. This strong demand has surprised even the most ardent Apple supporters.

Longtime Apple bull Piper Jaffray analyst Gene Munster, who has a $250 price target on the stock, came up far short in his estimates for opening weekend sales. On Monday he estimated that 425,000 phones had been sold, only to be shocked by the announcement from CEO Steve Jobs that the company actually sold over 1,000,000 iPhones. The idea that this demand could continue is very real. 

LPAM checks indicate that the vast majority of buyers actually had no intention of waiting in the opening weekend lines for their phones.  Instead, they plan on purchasing under less stressful conditions in the ensuing weeks. Those polled indicate that the primary reason for purchasing the iPhone is the 3G Internet speed, followed by phone use and iPod use. Consumers view this product not as a phone, but as a mini computer.

The subsidized $199 AT&T (T) price compares quite favorably to any other laptop on the market and this pricing power should propel Apple stock to new highs based on fundamental earnings growth. Munster, who is calling for 45 million iPhones to be sold in 2009, reports this will add a minimum of $4.8 billion in revenue. "Revenue from AT&T payments in 2009 would add 60 percent to Apple operating income if we applied an 80 percent gross margin to AT&T revenue share revenue and assumed no additional opex from AT&T revenue share," Munster wrote. "Our model takes a more conservative approach and assumes AT&T revenue share revenue is run through the model at normal corporate gross and operating margins." (appleinsider.com)

DISCLOSURE: Author owns AAPL.

Comments

[tom1234:]

with all the great news and the high price targets why is apple selling at such a lower price than expected

2008 Jul 15 06:25 AM

[tuskagee:]

Apple stock has been 'waterboarded' by crooked writers, analysts, and hedgefunds.

Every time it should rise, it is dunked by lies and innuendo.

2008 Jul 15 06:41 AM

[kidrazor:]

I don't think apple is being held down, if it wasn't for the economy we'd be above 200 no problem. Apple is secretly dominating the mobile operating systems, mobile ecosystems, and grabbing pc market share in the process. If you really think its being waterboarded, buy and hold and then watch it take off when it gets it breath

2008 Jul 15 06:54 AM

[kj:]

Gene Munster states that 45,000,000 iphone sales will add a minimum of $4.8 billion in revenue. This must be because AAPL is still using the subscription method to account for iphone sales. If we're looking to compare AAPL versus competitors on a consistent basis, shouldn't we ignore subscription basis and look at iphone revenue of $18 billion, or thereabouts? That is $400 in revenue per phone. This is the cash impact, right? Even though AAPL is spreading revenue/earnings out over 8 quarters, cash still hits at sale of device.

2008 Jul 15 08:20 AM

[Rob L:]

Apple's not going to move at all for a week (either up of down)...people are worried about earnings. It would be nice thought to see Apple beat AND announce a stock split....those would be great catalysts.

2008 Jul 15 08:23 AM

[Toni:]

170 pre-market, way to go.

With un upgrade from Munster and a new target to 270 maybe we can go to 160 too.

2008 Jul 15 08:28 AM

[mollytjm:]

mini computer indeed...people are finally understanding that this is NOT mainly a phone! investors are terrified in this market and the best company in the world is not immune to herd fear, but eventually the staying power of Apple will prove that it's a great long term investment. the short term numbers are not important to value investors.

2008 Jul 15 08:48 AM

[JW, PhD:]

NEWS FLASH: Apple sells 1 million iPhone 3Gs in the first weekend and Toni is still a moron.

2008 Jul 15 09:20 AM

[Mac'em X:]

150 people in line? That's all? I thought I read of lines in the US with at least 400 people.

Which is still nothing. Tokyo had lines of 1500+ people:
www.tekronomicon.com/s...

This is a stunning start!

2008 Jul 15 09:46 AM

[jocca:]

150 people on a Monday afternoon, several days past opening date. That is tremendous.

2008 Jul 15 10:18 AM

[Tom B:]

"mini computer indeed"

Not JUST a mini-computer; a mini-MACINTOSH. All these iPhone buyers-- many of them don't realize this-- may be buying their first Mac. And not JUST a Mac-- a location-aware Mac.

Let me include a couple of links that are good "reads":

www.louisgray.com/live...

scobleizer.com/2008/07...

Ladies and Gentlemen: the iPhone is HUGE.

2008 Jul 15 03:51 PM

[saintc:]

Last night (Tuesday July 16) I walked by the Apple store in Atlanta and was shocked to see at least 50+ people standing in line all the way out of the door and down the aisle of the mall. Pretty varied group too. How can there still be lines this long? If they don't run out they'll sell way over estimates on this.

2008 Jul 16 12:48 PM