Herd on the Street

In early December the sell-side jokers that cover Apple Computer (AAPL-NASDAQ) began to sharpen their pencils, taking their first cuts at modeling the impact of the iPhone on Apple’ earnings and pontificating on the stock’s investment appeal…

“However, we believe the iPhone is likely to be largely cannibalistic to iPod sales, rather than entirely incremental to Apple, limiting upside” Looks Good on You

Eric Savitz has a roundup of the latest guesstimates…

Apple’s iPhone business will become a $4.75 billion a year business, says Benjamin Reitzes, who follows the company for UBS Securities, but it will hurt Apple’s operating margins initially as the company ramps up to fight Motorola and the rest: “Assuming Apple is able to achieve this goal, we estimate a potential annual revenue contribution of about $4.75 billion (assuming a $475 average selling price to Apple) and annual EPS contribution of about $0.35. Our assumptions include operating margins of about 10% (well below Apple’s current 12.6% margin) due to the incremental costs associated with entering the cell phone market (note that Motorola currently has operating margins of 11.9%).” But it’s okay because, “Revenue from the actual cell phones is just the start. Through the phones, we believe Apple is embarking on another chapter in multiplying its revenue streams as it sells more accessories and cellular services. Also, with a foray into phones, we believe that Apple can expand revenues into incremental music and video. As a result, we believe the iPhone ecosystem can add up to $0.50 cents in earnings power within a year and a half.” Sales in the fiscal year ending September 2008 will be $31.5 billion, says Reitzes, above his prior estimate of $28 billion, because of strong performance of the iPhone, and he thinks Apple shares can rise to $118 over the next 12 months. Tech Trader

Do you trust people in suits?

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The content contained in this blog represents the opinions of 1440 Wall Street. This commentary in no way constitutes a solicitation of business or investment advice. It is intended solely for the entertainment of the reader, and the author. No position in security mentioned.

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