According to analysts at Morgan Stanley, Google parent Alphabet Inc (NASDAQ:GOOGL) has a big hit on its hands with its brand new smartphone, the Pixel.
The device, launched just a couple months ago, may even be poised to become a true rival to the all-powerful Apple iPhone.
Based on expectations of 5 to 6 million Pixels being sold next year, with retail prices ranging between $649 and $869, the firm estimates total Pixel 2017 sales of about $3.8 billion. That would be a very solid total for a brand new device, especially considering the lack of major carrier discounts (the phone is available unlocked or via Verizon, which isn’t offering a contract discount for the device).
Morgan Stanley also estimates that Google will sell approximately 3 million Pixels in the fourth quarter of this year, putting its Q4 sales at around $2 billion. That’s a far cry from rival Apple’s latest quarterly iPhone sales of 45.5 million, but it’s a start.
Google’s margins on its Pixel phones are also much smaller than Apple’s (22-25% versus 41% due largely to expensive internals), but the phone is a big stepping stone toward further Android user monetization, said the firm. The Pixel includes deeper Play store integration, is built with virtual reality (VR) in mind, and also offers Google’s new Assistant feature.
As the Pixel phone continues to catch on, it could drive further growth in Google’s massive advertising business, said Morgan Stanley.
Alphabet shares rose $9.42 (+1.21%) to $789.65 in Monday morning trading. Year-to-date, GOOGL has risen 1.26%, versus an 8.48% gain in the benchmark S&P 500 index during the same period.