This Day On The Street
Continue to site right-arrow
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here
Stocks Under $10 with 50-100% upside potential - 14 days FREE!

Apple's iPhone Is Banking Big Bucks

Stocks in this article: AAPL GOOG

NEW YORK ( TheStreet) -- Apple (AAPL) shares flirted with $400 Wednesday after the company posted blowout June quarter sales numbers in nearly every product category.

Apple was trading at $387.63, up $10.78 (2.86%) around 1 p.m. ET, after rising as high as $396.27.

Apple's eye-popping $7.79 a share profit was nearly $2 more than the $5.83 the street was expecting. The huge profit was fueled by shipments of 20.3 million iPhones to places like China, Brazil and Mexico. Apple booked $28.6 billion in sales for its fiscal third quarter, an 82% year-over-year growth rate that was more than $2 billion above analysts' estimates.

The astonishing results highlight not only the international popularity of the iPhone -- even in the face of more muscular Google (GOOG) Androids -- but also the huge mark-up Apple enjoys on the iconic mobile phone.

With $13.3 billion in iPhone revenue in the quarter, Apple is raking in roughly $655 for each phone.

Considering a tear-down analysis by outfits like iSuppli, which estimate the build cost of the iPhone 4 at $187.51, Apple is capturing a tremendous profit by marking the phone up 3.5 times over the cost.

The strong sales-to-cost ratio helped Apple widen its gross margin to 41.7%, considerably more than the 38% analysts were looking for.

But that won't necessarily last.

Apple told analysts on the earnings conference call that the current quarter is back-to-school season, which includes a higher mix of lower-margin Mac sales. This will likely reverse margin gains of the June quarter. Apple guided for 38% gross margin in the current quarter ending in September.

One takeaway from the Apple earnings call is that while the company is tempted to offer a cheaper, stripped-down iPhone due to the potential sales volume it represents, it isn't pursuing it. If anything, Apple will sell old versions of the phone for less and urge people to pay up for the new models.

Asked repeatedly about whether Apple would seek more sales in the prepaid market with a cheap iPhone, acting chief Tim Cook told analysts that the company is comfortable pushing the premium products.

"It's up to us to convince people to maybe spend a little more for a materially better experience of product," Cook said.

The upcoming iPhone 4S, due in September, may challenge that proposition. The new iPhone is expected to be a minor upgrade to the current iPhone 4. And as reported first by TheStreet, the super iPhone 4G LTE is still a year away.

--Written by Scott Moritz in New York.

To contact this writer, click here: Scott Moritz, or email:

Follow Scott on Twitter at MoritzDispatch

Select the service that is right for you!

Action Alerts PLUS
Try it NOW

Jim Cramer and Stephanie Link actively manage a real portfolio and reveal their money management tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
  • Weekly roundups
TheStreet Quant Ratings
Try it NOW
Only $49.95/yr

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
  • Upgrade/downgrade alerts
Stocks Under $10
Try it NOW

David Peltier, uncovers low dollar stocks with extraordinary upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
  • Weekly roundups
Dividend Stock Advisor
Try it NOW

Jim Cramer's protege, David Peltier, identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Alerts when market news affect the portfolio
  • Bi-weekly updates with exact steps to take - BUY, HOLD, SELL
Real Money Pro
Try it NOW

All of Real Money, plus 15 more of Wall Street's sharpest minds delivering actionable trading ideas, a comprehensive look at the market, and fundamental and technical analysis.

Product Features:
  • Real Money + Doug Kass Plus 15 more Wall Street Pros
  • Intraday commentary & news
  • Ultra-actionable trading ideas
Options Profits
Try it NOW

Our options trading pros provide daily market commentary and over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.

Product Features:
  • 100+ monthly options trading ideas
  • Actionable options commentary & news
  • Real-time trading community
  • Options TV
To begin commenting right away, you can log in below using your Disqus, Facebook, Twitter, OpenID or Yahoo login credentials. Alternatively, you can post a comment as a "guest" just by entering an email address. Your use of the commenting tool is subject to multiple terms of service/use and privacy policies - see here for more details.
Submit an article to us!


DOW 17,804.80 +26.65 0.15%
S&P 500 2,070.65 +9.42 0.46%
NASDAQ 4,765.38 +16.9840 0.36%

Brokerage Partners

Rates from

  • Mortgage
  • Credit Cards
  • Auto

Free Newsletters from TheStreet

My Subscriptions:

After the Bell

Before the Bell

Booyah! Newsletter

Midday Bell

TheStreet Top 10 Stories

Winners & Losers

Register for Newsletters
Top Rated Stocks Top Rated Funds Top Rated ETFs