Analyst: iPhone 8 to be priced relative to Galaxy S8+

Two months ago, Fast Company reported that iPhone 8 would start at above $1,000 due to costlier components and advanced technologies, such as wireless charging, VR capabilities, revamped industrial design, a curved AMOLED screen and more. UBS analyst Steven Milunovich begs to differ, telling CNBC that the device will come in for less than $1,000 as new models are expected to see a “bulge of buying”.

“We think an $870 price would be accretive to earnings per share but dilutive to gross margin, a dynamic Apple has said it would accept,” UBS noted. Samsung’s new Galaxy S8 is priced at $720 and its larger-screened Galaxy S8+ counterpart costs $840.

Apple's upcoming anniversary edition iPhone 8 is unlikely to cost $1,000 as has been speculated, with new models expected to see a "bulge of buying," UBS said in a note on Tuesday as it upgraded its outlook on the U.S. technology giant's earnings.

UBS said it now expects Apple's earnings per share (EPS) for fiscal 2018 – which begins in the December quarter of 2017 – to be $10.55, up from its previous estimate of $10.25. The iPhone average selling price (ASP) is likely to be $692, up from a prior estimate of $667, the investment bank added.

Here’s an excerpt from Milunovich’s research note:
Offsetting this display size differential is the fact that iPhone 8 could have features not included in Galaxy S8+, such as a front facing 3D sensing camera, embedded fingerprint sensor and higher quality facial recognition.
“Apple customers seem fine with paying more for products they feel are differentiated,” he added. Case in point: iPhone 7 Plus, which “has had more demand than any other Plus model released” thanks to the dual camera.

Based on a higher-priced iPhone 8 and a boosted upgrade cycle, the investment bank predicted that iPhone’s average selling price is likely to be $692, up from a prior estimate of $667. UBS now expects the company’s earnings per share for fiscal 2018 to be $10.55, up from its previous estimate of $10.25.


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