Analyst: Get Ready for AAPL Boost from China Mobile Deal

| Apple Stock Watch

With China Mobile pre-orders for Apple's iPhone 5S and iPhone 5C starting on December 25, Wells Fargo analyst Maynard Um thinks it's time for investors to get ready for a financial boost to Apple's bottom line in both its December and March quarters. Bringing the iPhone to China Mobile also bodes well for Sprint because the U.S. carrier plans to start using the same radio frequencies next year.

Wells Fargo expects China Mobile deal to boost iPhone salesWells Fargo expects China Mobile deal to boost iPhone sales

Mr. Um told investors,

The deal should give further confidence to both December and March quarter iPhone units. China Mobile's TD-LTE network operates in the 2.5GHz band, which could also bode well for iPhone at Sprint, which plans to overlay a faster 4G coverage in urban areas in 2014 using the 2.5GHz spectrum acquired through Clearwire.

Apple officially announced its China Mobile deal over the weekend, putting to rest the all but confirmed rumors that the iPhone would finally be available on the world's largest cell service network. China Mobile currently has over 760 million customers, which is more than the population of most countries.

Adding China Mobile to the iPhone family means that Apple can finally offer its smartphones through all three of China's carriers.

The prospect of new iPhone sales has already boosted Apple's stock. Following Sunday's announcement, the company's stock shot up more than US$18 to around $567 where it has hovered ever since.

Mr. Um is expecting Apple to sell 54.8 million iPhones during its December quarter, and 42.8 million during the March quarter. "While the China Mobile announcement had long been anticipated, we believe the official announcement, and the consequent certainty, should be viewed as a positive," he said.

Pre-orders for the iPhone start tomorrow, but Apple's new smartphone lineup won't be available on China Mobile until January 17, 2014.

Apple is currently trading at $567.30, down 2.79 (0.49%).

Comments

Constable Odo

It’s unlikely the China Mobile deal will drive up Apple’s share price very much.  All Wall Street is interested in is companies selling huge unit numbers of products to increase market share.  Most of the analysts are claiming Apple can only penetrate about 2%-3% of CM market share which is absolutely pathetic.  That translates to of 760 million China Mobile subscribers, iPhones will be in the hands of just a few million consumers.  Android will have 95% of China Mobile and Apple will have a measly 2%.  It’s like getting hit in the gut with a sledgehammer.  Is this really the best Apple can do in China?

ibuck

Most of the analysts are wrong about AAPL, as they are about most of the stocks they “analyze.” 

Ask them about Amazon, whose PE Ratio is 1,446.38 versus AAPL’s 14.28.  For reference, the PE ratios of Disney, 3M, Johnson & Johnson, even troubled GE, are 20 to 21.

RonMacGuy

Constable, not sure where you are reading about 2%-3%.  Let us know where you are reading this.

Try searching the web for ‘china mobile already has 42 million iphone users’ and read the articles where it is estimated that China Mobile has 42 million iphone users ALREADY on their network BEFORE selling a single iPhone.  This is based on China Mobile’s internal statistics - no BS analyst guessing.  So, if you do the math, this is already 5.5% of China Mobile’s market share - far from 2%-3%.

To quote Kaylene Hong from a thenextweb article, “The fact that China Mobile already has 42 million iPhone users on its network — which does not even have a compatible 3G network that the iPhone can run on — is testament of the large numbers it could possibly bring to Apple.”

So, you do realize that this means that not only did 5.5% of the current China Mobile customers go out of their way to buy iPhones outside of China Mobile’s infrastructure and then worked to get the correct China Moblie micro-SIM card to use their network, but they also did this knowing full well that their iPhone would only work on China Mobile’s 2G – GPRS/EDGE services?

I suspect Apple will initially have at least 5% share of China Mobile at the start, when every iPhone user will upgrade their SIM card to run on China Mobile’s 3G/4G networks.  Many of these people will probably buy new iPhones through China Mobile from the start, with millions of other new users joining them.  My prediction is Apple will have 20% of China Mobile’s market share by mid-2014.

Oh, and check out this nice little article on Yahoo from Dec 12, 2013.  http://finance.yahoo.com/news/iphone-market-share-quadruples-china-060800703.html
I really don’t know where you are seeing this 2%-3% figure, but like other haters around here I am sure you are making stuff up.

“Apple’s (AAPL) share in China’s smartphone market leapt in October, making the iPhone maker the third-largest smartphone player in the mainland, according to Counterpoint Research - a technology market research firm.

The company’s market share rose to 12 percent in October, quadrupling from 3 percent in the previous month, helped by strong sales of the iPhone 5S, data based on sales by major mass retailers and distributors, showed. “

Paul Rubin

There are some 30-40 million iphones operating on China Mobile where they don’t really support it, sort of like what went on with T-Mobile. No reason to think that Apple can’t reach 5% CM penetration over the next 18-24 months which is some 38 million iphones. Without China Mobile Apple would probably have sold in excess of 200M in that time frame so 38 million is nothing to sneeze at. Figure about 15M in year one and 23M in year two. Apple doesn’t have to have some gigantic portion of China Mobile sales like with AT&T or Verizon for this to be a huge success. You’re forgetting that they have almost 760,000,000 customers with a relatively low percentage of smart phones. Isn’t that like 7 AT&T’s? Sure Apple could come up with some crappy iphone for $300 that makes them literally no profit and they’d sell a ton of them and make no money in the process. That’s not the Apple way.

RonMacGuy

Come on, Odo. I was hoping to have a nice debate here. You’re better than just trolling some junk and leaving, aren’t you?

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