By now we all know that low end smartphones are not Apple’s current area of expertise. The company is known to produce high end smartphones that compete for the title of best smartphone of the year. The company has yet to release a low end smartphone, continuing to focus on one major device per year. However, that is all expected to change next Tuesday when the Cupertino company is expected to announce its new iPhone 5C, a lower end, “budget” iPhone. While it is expected that it will make an impact on Apple’s sales, it could make a bigger difference than most think.
As you can see in the chart above, phones under $300 account for just 2% of Apple’s sales. Currently, this would include the iPhone 4. However, when compared to other companies such as HTC (71% of sales under $300), there is a ton of room for Apple to grow. The closest competitor to Apple, Samsung, has 60% of its sales in the under $300 range. RBC’s Amit Daryanani, who is responsible for the chart, gave a little more insight into what we can expect to see in the future if the iPhone 5C is released.
From an EPS perspective we believe the Company can add $4.00+ in EPS to our CY14E estimate of $39.74, with a successful launch of an affordable iPhone. On a 12x multiple, this would add roughly $50 to Apple’s stock-price. We believe our ~56M unit estimate is conservative given that it represents 12% of the total low-end Smartphone market.
Do you think that Apple’s iPhone 5C launch will make a significant difference in Apple’s low end smartphone sales?