Apple's China success sets stage for iPhone 6, new products

Thu Apr 24, 2014 9:22am EDT

1 of 2. A man looks at his Apple iPad in front an Apple logo outside an Apple store in downtown Shanghai March 16, 2012.

Credit: Reuters/Aly Song

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(Reuters) - Strong sales of iPhones in China and emerging markets sets the stage for Apple Inc to reap even higher profits after it launches the next iPhone and other new products, analysts said.

At least 15 brokerages raised their price targets on the stock by as much as $60 to a high of $700 after it reported bumper results.

Shares of the company were up 8.5 percent at $569.49 in premarket trading on Thursday.

Apple's enlarged share buyback, bigger dividend, a larger iPhone 6 and new products would all drive the stock higher, RBC Capital Markets analyst Amit Daryanani said in a note titled "Buy before Tim does it himself".

On Wednesday, Apple reported sales of 43.7 million iPhones in the quarter ended March 29, far outpacing the 38 million that Wall Street had predicted. Revenue from greater China climbed 13 percent and Japan sales rose 26 percent.

Apple approved another $30 billion in share buybacks till the end of 2015 and authorized a rarely seen seven-for-one stock split, addressing calls to share more of its cash hoard while broadening the stock's appeal to individual investors.

Many Apple observers are betting on another successful product emerging from its secretive labs in Cupertino, California in the second half of this year - perhaps an iWatch for users to wear on their wrist. Chief Executive Tim Cook has promised new product categories for 2014.

"We believe the iPhone 6 will prove to be a big hit in China and elsewhere around the world, while the iWatch opens up a new product category for Apple, and we believe the ramp with China Mobile will accelerate in the second half of the year," Cantor Fitzgerald analyst Brian White said in a note.

(Reporting by Soham Chatterjee; Editing by Rodney Joyce)

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Comments (4)
aunticcp wrote:
Apple has made billions for its shareholders by dealing with Red China.The only relations that the rest of the World should be having with the cruel CCP is trying to bring to trial the thousands of Communist Party members who have been and are still committing millions of human rights atrocities.The brutal Chinese Communist Party has murdered over fifty million of its own people since 1949, since 1999 it has been attempting the blood-thirsty genocide of the tens of millions of innocent Falun Gong who live in Mainland China. To this end, the heinous CCP is using torture,slavery, organ harvesting and murder. Because of corporate greed, these atrocities and millions of others have been kept from the Western people by the Western media. The weak United Nations even appointed the brutal CCP a seat on its Human Rights Council this year. Shameful. Thank you for your concern.

Apr 24, 2014 10:10am EDT  --  Report as abuse
90frankle wrote:
I hope Apples I phone 5s will come down in price, when 6 comes

Apr 24, 2014 3:28pm EDT  --  Report as abuse
eMJayy wrote:
They’re selling phones and still making profits, but there’s no longer any connection between their handset sales and the growth of their platform.

The vast majority of their quarterly and yearly sales are now to established iPhone customers who are replacing old phones at an ever increasing rate. Last year only 1 in 5 iPhones went to folks who didn’t own one before, so Apple’s current business model is now just based on selling into replacement cycles that they’ve established in Western countries and in China through carriers and through their own stores. Having the vast majority of your phones going to iPhone users who want an upgrade is not the same thing as getting most of your phones into the hands of first time buyers. Heavy dependence on repeat business does nothing to increase the global relevance of the platform, especially when you’ve got both Android and Windows Phone successfully and rapidly growing their installed base by leaps and bounds precisely because of their ability to attract large numbers of new buyers with each release of affordable but very capable smartphones.

So while they continue to make money by continuing to rely on what few phone subsidy systems remain around the world, the growth rate of their installed base is actually on the verge of stalling because their prices are way too high to permit further expansion of their user numbers. It’s already happened to the iPad, which is why Apple’s iPad sales figures now only break 20 million in sales when they release a new product and then subsequently falls right back down to hover around 15 million per quarter until the next product update.

If Apple’s next iPhone release only manages to hit around the 55 million mark in sales for that quarter (it has been stuck in that zone for the last two product release cycles), that would be the point where I’d conclude that the iPhone has reached its plateau. And from that point on we’ll be seeing the same 40-50 million per quarter sales figures over and over again year after year until the iPhone fades out of existence like the iPod is currently doing. A new product may help keep Apple in the spotlight for a bit longer, but the iPhone’s financial success story and user adoption numbers cannot be replicated by any future Apple product because it was based on the exploitation of the subsidy system that allowed people to unknowingly pay hundreds more for it.

Apr 24, 2014 6:46pm EDT  --  Report as abuse
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