Here's a headline you don't see every day. In fact, here's a headline you haven't seen this year.
For the first time in close to six months, Apple today received an unexpected downgrade from Wall Street as a new breed of analyst is emerging: one who doubts that wireless carriers will keep offering giant iPhone subsidies. If the subsidies don't hold, neither will Apple's huge profit margins for the popular touchscreen smartphone.
“We expect post-paid wireless operators to remain firm in their plan to stunt the pace of phone upgrades in 2012 and we expect to see some initial evidence of their success in the current quarter,” BTIG’s Walter Piecyk, a veteran technology analyst, told clients Monday. “This will increase the need for Apple to grow its business in the pre-paid dominated emerging market space, in which handset subsidies are a rarity and the $600 ASP (average selling price) of the iPhone represents a big chunk of a household’s monthly income.”
As we all know, wireless operators like AT&T were more than happy to shell out big bucks for the iPhone when it first launched, both in light of domestic market exclusivity and the prospect of higher monthly wireless bills from iPhone users. But there remains a gap between this "nice thought" and the reality that ultimately manifested.
With carrier exclusively gone and features like iMessage drastically cutting into wireless plan profits, the iPhone is no longer the cash cow for carriers that it had been, given the enormous subsidies still in place. For that reason, analysts like Piecyk think the subsidies won't stay. And Apple's profits will take a hit as a result.
So how have investors and traders reacted to the downgrade? AAPL hit another new all-time high today north of $635 a share.
Source: CNBC
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