Needham ups Apple price target to $450 on growing iPhone, iPad sales
Needham & Company on Monday increased its price target for Apple to $450, citing "materially higher" sales of iPhone and iPad than were originally forecast.
Analyst Charlie Wolf with Needham said in a note to investors that he has made an upward revision to his forecast, which prompted the price target increase from $375 to $450.
"While the increase in iPhone sales was relatively modest, it nonetheless added $50 to our price target because of the profitability of the phone," Wolf wrote. "The migration to feature phone users to smartphones accelerated in the second half of 2010, suggesting that even our new forecast could prove to be conservative."
Wolf had forecast for Apple to sell 40.1 million iPhones in 2010, a number that came in well below the 47.5 million handsets that Apple actually did sell. In the last quarter alone, Apple sold a record 16.2 million iPhones.
The analyst noted that he also estimated sales of 250 million total smartphone shipments in 2010, though the actual number will likely prove to be closer to 300 million.
Wolf now sees Apple selling about 75 million iPhones in 2011, with the number growing to nearly 100 million in 2012. He's also adjusted his model to represent the average life of smartphone ownership at just 1.5 years, as carriers have encouraged subscribers to upgrade more quickly and become locked into a new contract.
In his revised value of AAPL stock, Wolf sees the iPhone representing the lion's share of its projected $450 value. Based on his model, the iPhone has a value per share of $240.08, well ahead of the $62.85 per share he values the company's excess cash. The Mac comes in third, with 10.8 percent of the stock's perceived value, with $48.81.
Wolf also felt compelled to increase is projections for iPad sales, as he sees the touchscreen tablet representing $43.29 of the company's projected $450 stock value. He said he does not believe that the iPad is going to rapidly lose market share as competing Android tablets are introduced.
"The media tablet market is focused on the consumption and to a lesser extent the creation of content, not on communications," Wolf said. "As a consequence, it's not naturally aligned with the carrier distribution networks, which have been instrumental in propelling sales of Android smartphones. The networks should play a much more limited role in the distribution of media tablets."
Apple's 15 million iPad sales in 2010 were 40 percent higher than Wolf's previous estimate. In his new model, he sees Apple selling 30.1 million iPads in 2011, retaining 90 percent of the tablet market share, and another 46.5 million in 2012, good for an 80 percent market share.
Analyst Charlie Wolf with Needham said in a note to investors that he has made an upward revision to his forecast, which prompted the price target increase from $375 to $450.
"While the increase in iPhone sales was relatively modest, it nonetheless added $50 to our price target because of the profitability of the phone," Wolf wrote. "The migration to feature phone users to smartphones accelerated in the second half of 2010, suggesting that even our new forecast could prove to be conservative."
Wolf had forecast for Apple to sell 40.1 million iPhones in 2010, a number that came in well below the 47.5 million handsets that Apple actually did sell. In the last quarter alone, Apple sold a record 16.2 million iPhones.
The analyst noted that he also estimated sales of 250 million total smartphone shipments in 2010, though the actual number will likely prove to be closer to 300 million.
Wolf now sees Apple selling about 75 million iPhones in 2011, with the number growing to nearly 100 million in 2012. He's also adjusted his model to represent the average life of smartphone ownership at just 1.5 years, as carriers have encouraged subscribers to upgrade more quickly and become locked into a new contract.
In his revised value of AAPL stock, Wolf sees the iPhone representing the lion's share of its projected $450 value. Based on his model, the iPhone has a value per share of $240.08, well ahead of the $62.85 per share he values the company's excess cash. The Mac comes in third, with 10.8 percent of the stock's perceived value, with $48.81.
Wolf also felt compelled to increase is projections for iPad sales, as he sees the touchscreen tablet representing $43.29 of the company's projected $450 stock value. He said he does not believe that the iPad is going to rapidly lose market share as competing Android tablets are introduced.
"The media tablet market is focused on the consumption and to a lesser extent the creation of content, not on communications," Wolf said. "As a consequence, it's not naturally aligned with the carrier distribution networks, which have been instrumental in propelling sales of Android smartphones. The networks should play a much more limited role in the distribution of media tablets."
Apple's 15 million iPad sales in 2010 were 40 percent higher than Wolf's previous estimate. In his new model, he sees Apple selling 30.1 million iPads in 2011, retaining 90 percent of the tablet market share, and another 46.5 million in 2012, good for an 80 percent market share.
Comments
$43.29 percent
Just imagine what they could sell if they could make them as fast as the world wanted them!!!
The same applies for the iPad. It's only available in a handfull of countries compared to the iPhone so far and they still can't make them fast enough. Even if the tablet market wasn't going to grow at all this year, the sales numbers from it's first three quaters would put it over 20 million for a full year, never mind catching up to actual demand, expanding to more markets and a possible lower entry price point once iPad2 is out. I think 40 million is much more realistic on that front.
Only $62.85 per share in cash? You need to figure in the ever-increasing pile 'o cash!
Yes, at the rate of couple billion a month now. Still, the cash is an little better than abstraction to investors until and unless Apple starts distributing some of it as a dividend.
Anyway, nice to see AAPL get a little bump from a target upgrade (if you can fairly attribute it to that). The last couple got little more than a yawn from the markets.
Yes, at the rate of couple billion a month now. Still, the cash is an little better than abstraction to investors until and unless Apple starts distributing some of it as a dividend.
Anyway, nice to see AAPL get a little bump from a target upgrade (if you can fairly attribute it to that). The last couple got little more than a yawn from the markets.
I'm against a cash distribution. That would signal they have run out of ideas and need the investors more than investors need them.
I'm against a cash distribution. That would signal they have run out of ideas and need the investors more than investors need them.
I agree but Apple needs to do something with this money. They are currently getting relatively low returns on the cash. They hold more cash than many banks. They must put some of this capital to work or return some value to the shareholder either through a dividend or a stock buyback.
Yes, at the rate of couple billion a month now. Still, the cash is an little better than abstraction to investors until and unless Apple starts distributing some of it as a dividend.
Anyway, nice to see AAPL get a little bump from a target upgrade (if you can fairly attribute it to that). The last couple got little more than a yawn from the markets.
I'm against a cash distribution. That would signal they have run out of ideas and need the investors more than investors need them.
I agree but Apple needs to do something with this money. They are currently getting relatively low returns on the cash. They hold more cash than many banks. They must put some of this capital to work or return some value to the shareholder either through a dividend or a stock buyback.
A one-time, massive share repurchase (i.e., not a repurchase plan) as a way to return money to shareholders is what I would want from Apple. (i) Tax efficient compared to dividends; (ii) Does not create the lock-in of dividends as expected payments (and obviates any possible -- certainly uncertain -- signaling issues related to whether the market perception of the stock will change); (iii) Buys back stock to keep as treasury stock for future employee option exercises as/if/when the stock rises, thereby mitigating dilution impact. (The fact that it will change EPS has nothing whatsoever to do with it, as some might think).
I'm against a cash distribution. That would signal they have run out of ideas and need the investors more than investors need them.
We've discussed this before of course, but I think what it actually signals is that they've made so much money that they can't responsibly reinvest all of it in growing the company's business. I think we all know that already -- so it would be a signal of staggering success, no more.
I think we all know that already -- so it would be a signal of staggering success, no more.
No, we don't. You don't. In fact, there's no way that we could.
That's the problem with the full-of-unwarranted-certitude statements you seem to repeatedly make on this issue.
No, we don't. You don't. In fact, there's no way that we could.
That's the problem with the full-of-unwarranted-certitude statements you seem to repeatedly make on this issue.
It's my opinion, just as your opinion belongs to you. My opinion has been backed up with a much more detailed argument in the past, as I am sure you know, but which you are pretending doesn't exist for purposes of a flippant response.
I agree but Apple needs to do something with this money. They are currently getting relatively low returns on the cash. They hold more cash than many banks. They must put some of this capital to work or return some value to the shareholder either through a dividend or a stock buyback.
If they were to attempt a stock buyback, it could only happen if they experienced a large drop in AAPL... which may not happen at any time in the near term.
I'd suggest continuing to buy small, innovative companies. These things take time to evaluate and they've done the right things so far.
If they were to attempt a stock buyback, it could only happen if they experienced a large drop in AAPL... which may not happen at any time in the near term.
I'd suggest continuing to buy small, innovative companies. These things take time to evaluate and they've done the right things so far.
I agree they should do this. It also appears that they may be building their own data centers around the world which could account for $1-1.5B per pop. But they could finance these with current earnings while still growing their cash reserves.
I actually believe they have some kind of big move in mind but its hard to see what it would be. Maybe a worldwide MVNO play but that does not seem like it would dent that pile of cash too much.
Can anyone else here see Apple hitting $1000. per share in the near future? What would it take?
A tripling of earnings, at least.
I agree they should do this. It also appears that they may be building their own data centers around the world which could account for $1-1.5B per pop. But they could finance these with current earnings while still growing their cash reserves.
I actually believe they have some kind of big move in mind but its hard to see what it would be. Maybe a worldwide MVNO play but that does not seem like it would dent that pile of cash too much.
It is also possible they know something about the way the world is heading. I think countries are discovering that if they do not have wi-fi or wireless access everywhere it makes them less competitive. I think we'll continue to see experiments where entire cities are wired for wi-fi or something like WiMax and have a basic level of access for free in the future.