JP MORGAN: We Expect Amazon To Sell Very Few Phones

The notes we've read are all positive, but for the most part expectations are pretty muted. Nobody is expecting the Fire phone to be a smash hit.

Doug Anmuth at JP Morgan, for instance, estimates 2-3 million in unit sales this year. In February, JP Morgan's Apple analyst Mark Moskowitz estimated Apple would sell 83.8 million iPhones this year. That means Apple will sell more iPhones in two weeks than Amazon will sell in six months.

So, in the short term, people aren't expecting much of an impact. In the long run, though, it's foolish to underestimate Amazon. Presumably the price is going to drop and the phone is going to be more competitive.

Here's some analyst reactions:

JP Morgan: The phone is currently available through just one carrier (AT&T), and we expect a modest 2-3M in sales this year. We expect Fire Phone sales will be driven by strong integration with Amazon digital media products, heavy homepage marketing toward Amazon's large existing customer base in the U.S.-especially Prime customers-and help from AT&T. The phone is feature-rich from a hardware and software perspective and we view the device itself as having roughly neutral economics, with upside coming from deeper penetration of the Amazon ecosystem through sales of digital media and physical goods. We believe the phone is differentiated, but the higher end price points and smaller size of the Amazon App store could be limitations.

Benchmark: The Fire phone comes with a free year of Amazon Prime, which should not only help Prime adoption but also drive sales through the Firefly technology. Still, the phone does not support Google Play or the other services associated with Google's (GOOG-Not Rated) version of Android, potentially limiting the initial user experience, although a developer kit is already available as well, which should contribute to building out Amazon's relatively limited app store. Ultimately, we believe the Fire phone will be a positive contributor to the development of Amazon's digital ecosystem with additional potential to act as a universal remote for Amazon's Fire lineup and technologies.

SunTrust: Many investors will debate why Amazon would launch a phone vs. just having the best apps on other platforms. We think there are 5 reasons: 1) Data - Amazon can harness the consumer behavior data to inform many decisions such as: pricing, inventory management, and product category expansion; 2) Friction - Amazon can reduce the friction in an increasingly mobile environment for consumer purchases and decrease its reliance on partners like Google and Apple; 3) Scale - Mobile phone market is multiple times the size of PCs and Tablets, providing a direct purchase access point for consumers - this can embed Amazon more into the daily life of consumers; 4) Innovation - Amazon is pushing the envelope in areas of innovation such as 3D and Firefly, which spur the entire industry to move faster on applications that can grow eCommerce; 5) Optionality - Amazon has launched its first version, but it's possible the company can expand its offerings into other areas including areas like payments, mobile ads, and local services.