Here at MacBlogz, we know that since the announcement of the $199 iPhone, you have been tossing and turning in bed at night wondering what is behind the dramatic price reduction. Well, finally, your quesitons have been answered. According to Oppenheimer analyst Yair Reiner, AT&T is paying a subsidy of $325 per 3G iPhone. The average smartphone receives a subsidy of around $200. This play by AT&T shows the company’s confidence (or desperation to carry) the iPhone and its ability to bring in new subscribers and to increase the current subscribers usage plans.
Additionally, AT&T is said to be paying Apple an extra $100 for new subscribers signed up in Apple stores. With a total comission of $425, plus the selling price of $199, Apple is still set to bring in roughly $625 per iPhone sold, placing revnue for the 3G iPhone on the same level as that of the first generation device.
With this information, Reiner maintains his stance at a $235 stock target price, with the above concensus estimates of 15.2 millions units sold in the months left in 2008 and 33.2 million units to follow in 2009. As analyst Vijay Rakesh writes, “We recommend that investors take advantage of the price weakness to build core positions in Apple, despite some of the stock weakness surrounding an uncertain consumer and CEO Steve Jobs’ health.”
With Apple up today by 0.9%, we agree it is still a great time to invest. But what about AT&T? What effect will this agreement have on their stock? With AT&T (ticker symbol “T”) hovering on the lower end of their 52-week price range, and historically paying off reliable dividends, AT&T might be a company worth looking into as it continues to ride the uber-exclusive iPhone gravy train.
