Mobile Weekly Notes: Record iPhone Pre-Orders, Android One Platform, BlackBerry’s Payment Service

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The mobile industry had an eventful week, which began with Apple (NASDAQ:AAPL) reporting a record number of pre-orders for its iPhone 6 handsets and Google (NASDAQ:GOOG) introducing its first set of phones under the Android One platform that is targeted at emerging markets. Additionally, BlackBerry (NASDAQ:BBRY) announced that it would be expanding its mobile payment initiative while taking it cross platform. Here is a quick roundup of the news that mattered for the mobile stocks we cover.

See our complete analysis for Apple|Google |Samsung Electronics | BlackBerry

Apple’s Record iPhone Pre-orders

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Apple announced that it had received over 4 million first-day pre-orders for its iPhone 6 and iPhone 6 Plus handsets, which is almost double the number of pre-orders that the company notched for the iPhone 5 in the same time period. While 24 hours represents a small sample size to gauge the longer-term sales of the phone, the company is certainly seeing pent-up demand given its prior lack of a large-screen offering. The company also seems to be facing some production capacity constraints, particularly for the iPhone 6 Plus model, which has seen shipment dates extend to as much as 4 weeks for customers in the U.S. The phone will go on sale in 10 markets including the U.S., Germany and Japan on September 19, with subsequent launches in other regions in the coming weeks. However, Apple has yet to announce a launch date for the phones in China – one of its largest and fastest-growing markets – likely because of a pending licence approval from Chinese regulators. [1]

We have a $97 price estimate for Apple, which translates to a market cap of around $580 billion. Our price estimate represents a slight downside to the current market price. We estimate the company’s FY 2014 EPS at around $6.27, compared to a consensus estimate of around $6.33 according to Reuters. We are modeling iPhone shipments of around 172 million units for CY 2014, with the number rising to around 190 million units in CY 2015.

Google’s Android One Initiative And Its Threat To Samsung

Google introduced its Android One platform for smartphones earlier this week, working with 3 Indian smartphone vendors who launched handsets priced at around $100. Through the Android One initiative, Google is looking to improve the quality of the user experience on low-priced Android smartphones, enticing customers in emerging markets to upgrade from feature phones, eventually driving users to the company’s search and internet services. Google plans to expand the program to markets such as Indonesia, Pakistan, the Philippines and Bangladesh, with vendors including Panasonic, Asus, Acer, HTC, Alcatel and Lenovo participating as hardware partners. We believe that the move could pose a threat to Samsung Electronics (PINK:SSNLF), the world’s largest smartphone manufacturer. While Samsung offers smartphones at price points of around $100 in emerging markets, they have not been particularly well-reviewed owing to their inconsistent software experience, although they have sold quite well. Given that customers at the low end often bank on their smartphones to be their primary computing devices, they could veer towards the better software experience and better performance that Android One devices could offer (see The Impact on Samsung of Google’s Android One Initiative).

Trefis has a $1,200 price estimate for Samsung, which implies a market cap of around $177 billion. Our price estimate is about in line with the current market price. We estimate the company’s FY 2014 EPS at around $170, compared to a consensus estimate of around $152 according to Reuters.

BlackBerry Takes Its Payment Service Cross Platform

BlackBerry announced some initiatives to improve the capabilities of BBM Money, its mobile payment service that operates on the BlackBerry Messenger (BBM) messaging platform.  While earlier version of BBM Money supported basic mobile wallet services for BlackBerry phones, the company now intends to go cross platform with the new version supporting iOS and Android devices as well. [2] The new service will initially be launched in Indonesia, which is one of BBM’s largest markets. The service will allow payments in participating retail stores and online stores and will include pass codes and encryption, according to BlackBerry. While the mobile payment space looks poised to go mainstream, with Apple having recently launched its Apple Pay service, we believe that BlackBerry could face some challenges. Firstly, the company will have to bring in more participating retailers. Additionally, the company has seen global BBM active users remain nearly flat over the last 2 quarters, and this could limit the potential to scale up the service to other markets.

Trefis has an $8.80 price estimate for BlackBerry, which translates to a market cap of around $4.6 billion. Our price estimate represents a more than 15% downside from the current market price. We estimate the company’s FY 2015 loss per share at around $0.68 which compares to a consensus of around $0.61 according to Reuters.

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Notes:
  1. Apple’s iPhone 6 still one license away from elusive China launch, Reuters, September 2014 []
  2. BlackBerry Enhances Mobile Payment Capabilities for BBM Users, MarketWatch, September 2014 []