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.