What's A Share Of Apple Worth When The Average iPhone Cost Hits $730?

Ahead of the much anticipated iPhone 8 launch, some analysts, including Goldman Sachs' Simona Jankowski, are suggesting that Apple Inc. (NASDAQ: AAPL) could price its new smartphone starting at $1,000.

UBS's Steven Milunovich also expects Apple to sell its new iPhone above $999, but the entry level iPhone 8 will cost $870 and the highest end device will sell for $1,070. Apple will still continue selling older models, and the analyst thinks that the average selling price of an iPhone device in 2017 will be $730. Meanwhile, consensus estimates are calling for the ASP of an iPhone in 2017 to be $680, which is just $21 ahead of fiscal 2017's ASP of $659.

Math Behind The $730 ASP

Milunovich went on to calculate the math behind a $730 ASP on Apple's stock price.

Assuming Apple charges on average $730 per iPhone then the analyst's fiscal 2018 earnings per share estimate moves higher from $10.80 to $11.15 versus the consensus estimate of just $10.42. In fact, the analyst noted that the current consensus estimate is similar to his bear case scenario, which assumes that interest in the high-end OLED model is limited due to its expensive price point.

Milunovich doesn't believe this will be the case since Apple's pricing philosophy is not one of "how much can we charge" but choosing a price consumers will pay and then designing a product for that price point. The analyst cited notable Apple expert Neil Cybart who believes consumers will gladly spend $1,000 on an iPhone "without thinking twice."

Finally, the analyst noted that based on his revised estimates he is increasing his price target on Apple's stock from $165 to $170 while maintaining a Buy rating.

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