Thursday, July 12, 2012

AAPL’s iPhone 5 to Trump Mature U.S. Market, Says Raymond James

Raymond James‘s Tavis McCourt today takes what he calls a “deep dive” into the matter ofApple‘s (AAPL) iPhone sales, in particular, in the U.S., writing that the matter of how many units Verizon Communications (VZ), AT&T (T), and Sprint-Nextel (S) will each sell has been one of the most frequent questions he’s received from investors. McCourt, who has a Strong Buy rating on Apple shares, writes that Apple will probably sell 39.7 million iPhones with the “Big 3″ U.S. carriers, as he calls them, this calendar year, with its share of U.S. smartphone sales rising to 60% from 58% in Q1. That speaks to a trend whereby Apple sales have risen at the three, even though the market for smartphones is overall more mature at this point: In 1Q12, smartphone sales at the “Big 3” carriers were 15.6 million, down from 16.0 million in 1Q11, the first y/y drop that we can ever remember. This was driven by increasing maturation of smartphones (55% of the postpaid base at the Big 3 are now on smartphones), and less aggressive upgrade incentives (increased fees and less flexibility for those wishing to upgrade before their 2 year contract expires). Despite this trend, iPhone sales at the Big 3 were 9.0 million in 1Q12, up from 5.8 million y/y, and increased y/y at every carrier. When the new iPhone comes out, the “iPhone 5,” McCourt predicts, the device will see rising popularity at Verizon and Sprint, bringing those carriers more on a part with AT&T, which still sells more iPhone units than either of the other two. He also seems to think the inclusion of faster “long term evolution,” or LTE, networking in the next model will level the playing field with LTE-based phones from, for example, Samsung Electronics (005930KS) and HTC (2498TW), both of which run Google‘s (GOOG) Android operating system: We have assumed that AT&T loses a bit of share this year, and Verizon has an especially strong 4Q due to its already large sales of LTE-based Android devices, which we believe will take a severe hit to demand when an LTE-based iPhone is announced. Put simply, we see no reason why iPhone’s share at AT&T of ~70% for 2011 wouldn’t ultimately be similar at Verizon and Sprint once it is no longer at an LTE radio disadvantage. Unlike AT&T, Verizon and Sprint have had reasonably successful 4G Android campaigns, which attract users away from the 3G iPhone who want the 4G network connectivity. This disadvantage likely goes away for the iPhone with the iPhone 5. That is despite a tightening of upgrade policies at carriers generally, he writes. McCourt’s colleague Frank Louthan, who maintains an Outperform rating on Sprint stock, and Market Perform ratings on AT&T and Verizon stock, lowered his estimates slightly for both AT&T and Verizon, writing that “In general, we continue to believe Verizon is in a superior position to offset the negative impact of higher iPhone subsidies due to better margins, lower churn, and a lower base of iPhone customers currently.” Louthan cut his 2012 EPS view for AT&T to $2.30 from $2.36, and cut his Verizon EPS estimate this year by a penny to $2.44. Apple shares today are down $3.49, or 0.6%, at $600.94. AT&T stock is down 43 cents, or 1.2%, at $34.84, Sprint shares are off 2 cents, or 0.8%, at $3.21, and Verizon stock is down 23 cents, or half a percent, at $44.67. 。 wholesale accessories,ipad accessories,ipod accessories,iphone accessories

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