Bernstein Research's Toni Sacconaghi issued a 13-page report last week in which he estimated that the iPhone's gross profit margins were an astounding 57.8%. Those margins tower above Apple's competitors with RIM estimated to have 43% profit margins, Nokia 33%, Motorola 32%, and HTC 31.7%.
Sacconaghi believes that the iPhone's high gross margins could change Apple's business model as the iPhone's share of Apple's overall revenue stream grows from 30% in FY09 to an estimated 45% to 50% in FY11.
Philip Elmer-DeWitt over at Apple 2.0 notes that while the Street generally assumes Apple's profit margins will decline over the next few years, Sacconaghi believes they will increase due to a few key points:
- iPhone prices are actually increasing. In Q3 2009, the average wholesale price was $588. In Q1 2010 it's risen to $638.
- Buyers are still more than eager for the iPhone. There is no sign of price resistance from either customers or carriers. Mobile partners are still lining up to get the iPhone with Apple adding 15 new ones over the past 4 months.
Sacconaghi rates AAPL as "Outperform" and has a price target of $250. In his report he states, "We believe that on a cash flow basis the stock is very attractively valued and that the stock is the most attractive secular name in our coverage universe."