Adding More China to iPhone Sales Gets Apple to $430

July 14th, 2011 by Trefis Team
+8.61%
Upside
169
Market
183
Trefis
AAPL: Apple logo
AAPL
Apple
Apple iPhone

Source: Wikipedia

China Telecom could begin offering Apple’s (NASDAQ:AAPL) iPhone by the end of this year in a deal that could represent a $9 billion opportunity for the tech giant according to recent reports.  [1] [2] We believe that this deal could give Apple an opportunity to expand its presence in emerging markets like China and challenge Google (NASDAQ:GOOG) Android based phones, Research in Motion (NASDAQ:RIMM) and Nokia (NYSE:NOK) in the emerging market smartphone market.
Given that Apple’s iPhone accounts for over 50% of valuation, positive news here will likely move the stock. Our $430 price estimate for Apple stock is about 20% above market price.

China Telecom Adds to Strong Growth in China

We estimate that Apple has a market share of close to 3% for all mobile phones sold. Apple has experienced rapid growth from the China market in the past from its agreement with China Unicom to sell iPhones. According to Apple, revenues from Greater China increased about 3x in fiscal year Q2 2011 compared to the same period of last year. [3]

China is the largest mobile subscriber market in the world and China Telecom has about 106 million subscribers. Out of these, about 13 to 15 million subscribers are considered high-end subscribers. [2]

We estimate that worldwide Apple will be able to sell more than 106 million iPhones in 2012. If we assume that all of China Telecom’s high-end subscribers end up buying iPhone, Apple could sell around 120 million iPhones in 2012 much more than what we estimate. This means that Apple’s worldwide market share could increase at a faster rate in 2012 to reach around 7% instead of 6% that we estimate. This scenario alone adds around 5% upside to our price estimate for Apple stock.

You can drag the trend line above to come up with your own forecasts.

Relevant Articles
  1. China In Focus As Apple Reports Q2 Results
  2. Down 10% This Year, Will Gen AI Tools Help Apple Stock Recover?
  3. Down 5% Over The Last Month, Will Strong iPhone Sales Help Apple Offset Mac Headwinds In Q1?
  4. After Over A 40% Rally In 2023, Will Antitrust And iPhone Issues Hurt Apple Stock?
  5. Up 45% Since The Beginning Of 2023, Where Is Apple Stock Headed?
  6. Up 34% This Year, Will Apple Stock Rally Further Following Q4 Results?

See our complete analysis for Apple stock here

Notes:
  1. China Telecom plans iPhone launch year-end, Reuters, July 13th, 2011 [↩]
  2. China Telecom deal viewed as $9B revenue opportunity for Apple, AppleInsider, July 14th, 2011 [↩] [↩]
  3. Apple FY Q2 2011 earnings conference call transcript, SeekingAlpha, April 20th, 2011 [↩]