Apple iPhone ASP Expected To Eclipse $700 For The First Time

Sep. 13, 2017 1:34 PM ETApple Inc. (AAPL)38 Comments

Summary

  • Apple Watch is a standalone product. It could reach the same heights as the iPhone over time. If it can, it would be huge to Apple's bottom line.
  • iPhone introduces technologies that have been in the works for years. While Apple may be late to the game, its customers are willing to wait for Apple's detail and quality.
  • iPhone ASP could eclipse $700-plus for the first time in full-year 2018. This could be worth $30 per share in incremental value.

We are long-term shareholders of Apple (NASDAQ:AAPL) with a renewed conviction to buy more shares for the long term for two very big reasons. First, we believe Apple Watch with cellular will prove to be the tipping point for a lot of new Apple Watch owners in the coming years. And second, we believe Apple's stickiness allows it to release technologies "late to the game" and still be successful. And with the launch of these technologies, Apple is finding ways to push pricing higher. We estimate iPhone ASP could eclipse $700-plus for the first time, in full-year 2018.

Source: Apple Keynote

Apple Watch

Apple introduced a new standalone Apple Watch which we believe has the potential to eventually reach the scale of the iPhone. Just two years ago when the Apple Watch was first introduced, we never thought Apple could sell 12 million Apple Watches in 2015 and 2016. Apple continues to add more functionality to the Watch, just as it did with the iPhone. With cellular functionality, Apple Watch users will be able to leave their iPhone at home. We believe cellular is going to prove to be the tipping point for a lot of new Apple Watch owners.

We believe cellular is going to prove to be the tipping point for a lot of new Apple Watch owners.

But will Apple Watch eventually cannibalize the iPhone?

No. At least not yet. Since it still lacks a lot of the full-screen features of the iPhone. It’s like giving up a desktop or laptop user interface completely. Some can do it, but many still need it. There may be a time in the next few iterations where an Apple Watch will replace an iPhone for days at a time. But that time is not now. If that time were to come to pass, we believe Apple would gradually increase

This article was written by

SMRE is authored by a CFA Charterholder, who worked in Sell Side Equity Research for 4 years.SMRE's philosophy on investing has slowly evolved over time. Some of the lessons include: 1) A good nights sleep comes from investing in companies you understand and believe in. 2) "Time in the market beats Timing the market". 3) Make sure your investing style matches the person giving you a recommendation (i.e. long term, short term, etc.) Research is an educated guess on future outcomes. SMRE is here to share our assumptions on some companies we believe in. We hope you will challenge our assumptions! Recommended Reading List - A collection of investing and non investing books we recommend Made In America - Sam Walton Tuesdays with Morrie - Mitch Albom The Happiness Equation - Neil Pasricha Good to Great - Jim Collins Influence - Robert CialdiniTipping Point - Malcolm Gladwell

Disclosure: I am/we are long AAPL. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

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