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Continued iPhone growth could push Apple stock to $400

post #1 of 55
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Morgan Stanley analyst Katy Huberty said Monday she believes iPhone market share growth, including in the enterprise market, along with strong initial demand for the iPad will push Apple stock to $310, but her "bull case" scenario shows it going even higher, to $400.

Huberty's latest note to investors notes a survey that found 58 percent of iPhone customers plan to upgrade their iPhone in the next year, up significantly from the 18 percent who said the same in 2008. That's a difference of 18 million new sales in calendar year 2011.

Huberty continues to believe that a price cut for the iPhone would produce great benefits for Apple. She sees U.S. demand alone increasing by 40 percent with either a $50 price drop for the handset, or a $20 cut in service plan costs.

Morgan Stanley's "base case" for Apple stock, which projects it to rise to $310, includes only a price cut for the iPhone hardware. But the bull case, where AAPL skyrockets to $400, assumes a more aggressive price reduction in both hardware and service on Apple's part.

In addition, Huberty believes that the addition of Verizon as a carrier in the U.S. could offer Apple another 7 million unit sales. She believes that 17 percent of Verizon customers would upgrade to the iPhone if the option were available. Huberty's base case assumes the iPhone won't debut on the Verizon network until the second half of 2011, while the bull case includes a debut in the first half of 2011.

Broader distribution is another key to iPhone expansion, with Apple making inroads in the enterprise market and expanding to new countries and carriers across the world.



Apple was also added to Morgan Stanley's "Best Idea" list, highlighting it as one of the best options on Wall Street. The Apple upgrade is quite a change for Huberty from just a few years ago, when she was notoriously negative on AAPL stock, suggesting the iPhone was too expensive even at a $199 price point. In late 2008, she predicted that iPhone sales would suffer because Apple had priced the product too high.



But in 2009, the analyst turned positive on Apple, stating that the company had become the "clear leader in the battle over the mobile Internet."
post #2 of 55
400? It'll be worth more than Exxon-Mobil.
post #3 of 55
Quote:
Originally Posted by AppleInsider View Post

The Apple upgrade is quite a change for Huberty from just a few years ago, when she was notoriously negative on AAPL stock, suggesting the iPhone was too expensive even at a $199 price point. In late 2008, she predicted that iPhone sales would suffer because Apple had priced the product too high.



She was just plain wrong then. Is she just plain right now?
post #4 of 55
Katy Huberty jumping on board and is one of the last to join the 300 club, Until we see things improving in europe the U.S. market is not going higher and neither is APPLE.

By the way I don't see a time frame in her prediction. So she's calling for $400 by when???
post #5 of 55
Let's not get too intoxicated by these predictions. Apple executes better than most but they are not infallible.
post #6 of 55
The growth potential is there without a shadow of a doubt.
post #7 of 55
Quote:
Originally Posted by Stevie View Post

She was just plain wrong then. Is she just plain right now?

well, at least she predicts sales based upon something. In her case, it is price price price. In consumer electronics it is a given.. more for less.. with ramp up and economy of scale and competition entering the arena ..

But Apple might be one up on her and instead introduce a really good additional phone model that steps down from the flagship and erodes profits for Rim and Android who will then need to lower their price to fight it out. This will leave full margin profit on the new
iphone flag ship to be introduced in June. I like this scenario the best as their is not enough saturation to start discounting yet - as distribution ramp up still has open holes to fill at the existing pricing and margin models being currently used.

a lower margin for the iphone at this time is not necessary. Next year, when the smart phone market is closer to saturation with even more phones models fighting for shelf space and distribution .. is the time for price erosion..

Bringing out a diversionary model that causes the comparison in the market to go from Android/rimm/nokia vs iphone to ..a focus on iphone 4G and iphone slightly lower priced attack dog will effectively muzzle the attack from below at apples soft underbelly where margins start to erode that is presently taking place..
post #8 of 55
Quote:
Originally Posted by BUSHMAN4 View Post

Katy Huberty jumping on board and is one of the last to join the 300 club,

Unfortunately, it is generally the case that when the entire market is behind something, it falls off a cliff. When EVERYONE is bullish, it's time to sell, or at least hedge your bets (I sold about 1/2 my AAPL at 270).

Now, if Enderle starts saying something positive about Apple, then it's DEFINITELY time to sell.
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post #9 of 55
Quote:
Originally Posted by jragosta View Post

Unfortunately, it is generally the case that when the entire market is behind something, it falls off a cliff. When EVERYONE is bullish, it's time to sell, or at least hedge your bets (I sold about 1/2 my AAPL at 270).

You just don't want to see it higher than 270 because you sold.
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post #10 of 55
I think this analyst is behind the curve a little bit. When she was negative about the iPhone when it was BY FAR the best product on the hottest market. Today the phone is not as hot, no wow factor either from iPhone or Andoid really, as people get used to seeing phones become more like personal mini PCs. The market is getting saturated with both iPhones and Androids and I don't see the iPhone growing at breakneck speeds anymore. (it will grow don't get me wrong)

The best bet is the iPad, which is in a new category all by itself, but since it is a niche device it will most likely not be as widely adopted as the iPhone. I am sure a lot more corporate buyers will gravitate to the iPad, as it is a perfect business laptop replacement. (not like accounting or finance, business as in I run a car repair shop and order parts JIT using iPad) For a home user though, I think 13 inch laptop is more then enough.

Don't get me wrong, I think iPhone can benefit from a price reduction, but I don't expect some huge rise in stock price because it would attract low margin customers would not be willing to pay much for premium, especially if the network (ATT) continues to have issues.
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post #11 of 55
Sounds good to me, bring it AAPL!
post #12 of 55
17% of VZW users is a joke. I doubt they could hit 10% best-case. AT&T has a high percentage for different reasons. But, AAPL is a growth story to be sure.
post #13 of 55
Quote:
Originally Posted by jragosta View Post

(I sold about 1/2 my AAPL at 270).

Congratulations, your timing was good. But are you ever planning to get back in with that money? Are you planning to do well by recognizing the peaks and valleys as they happen, or have you taken your profit for good because Apple's growth potential no longer looks as strong as it previously did?
post #14 of 55
Quote:
Originally Posted by aaarrrgggh View Post

17% of VZW users is a joke. I doubt they could hit 10% best-case. AT&T has a high percentage for different reasons.

Can you elaborate, instead of just making bland assertions? Why only 10%? What are the 'different reasons' for ATT?
post #15 of 55
Huberty was the farthest off the last couple times her AAPL predictions were made, so it's well worth waiting and seeing.
post #16 of 55
Quote:
Originally Posted by anantksundaram View Post

Can you elaborate, instead of just making bland assertions? Why only 10%? What are the 'different reasons' for ATT?

17% Is based on ATT's current percentages.

-iPhone is AT&T's dominant smart phone. VZW has a couple already
-People are on ATT because of the iPhone. Expect people to move to VZW from ATT if both have iPhone. Can't count them twice.
-Android doesn't really exist on ATT yet, and will once iPhone goes multi-carrier.
post #17 of 55
Does it really need to be said again? Huberty is factually one of the worst Apple analysts working. One look at her track record and you'll be seeing spots for weeks. Until her accuracy improves by leaps and bounds, she can be safely ignored, on both the upside and downside.

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post #18 of 55
Do any of these financial analysts have any clue about technology or the companies that manufacture computer technology? Look at a stock like MSFT, they sit below $30.00 per share, yet their market cap is still above AAPL. Its blatantly clear which company is technically superior when it comes to innovation and quality, yet these analysts will make reports about their favorite based on the tech they personally use.

This particular analyst is probably a windows drone that clearly has no clue about what a quality product is, or that AAPL was capable of becoming a more profitable and superior stock to MSFT. He/she clearly is nothing but a bean counter that seeks nothing but profit and cares nothing for the actual tech involved to even count out AAPL stock from performing well, even in the light of game changing tech like iPhone/iPad. These people have no clue, they're MSFT shareholders that are fearful that AAPL will one day make their investments worthless.

I really cant listen to these analysts anymore, they obviously have not a single technological bone in their body and only care about profits and not the tech involved. Articles like this I tend to just ignore, it makes very little sense to consider any so called predictions of these want to be analysts.
post #19 of 55
By "hardware cost" (Y axis of the graph) Huberty presumably is trying to say "hardware retail price."
post #20 of 55
Quote:
quite a change for Huberty from just a few years ago, when she was notoriously negative on AAPL stock, suggesting the iPhone was too expensive even at a $199 price point.

Unless I am missreading it ...she still thinks the iPhone is too expensive at $199. Maybe for different reasons. The one thing that hasnt changed is that she was wrong then and she is wrong now (just for different reasons

Has she even compared AAPLs margins to DELLs? Allowing price point erosion before it is required is a slippery slope. It might seem like a good deal for revenue and for consumers, but once margins evaporate so does most true innovation. The driver is gone. All creativity goes into blaoting the feature list while the real focus is on the race for the basement in prices.
post #21 of 55
Quote:
Originally Posted by Stevie View Post

She was just plain wrong then. Is she just plain right now?

Katy Huberty's track record is horrible. She is not a StarMine-rated overachiever.

AppleInsider really show not be referring to her predictions, as well as those from Shaw Wu, Gene Munster, Gartner, and Enderle. Her Apple predictions are garbage; she does not understand this company nor market.
post #22 of 55
Once again, Katy "Wall Street's worst Apple watcher" Hubert shows she really doesn't understand Apple's business model. This time it's partly structural and partly reality. First, Apple really doesn't care about the enterprise market, and they shouldn't. There are far more consumers willing to buy the iPhone than there will ever be enterprise customers; Apple has done a great job making the iPhone enterprise-friendly, but this really isn't their primary market. It's a competitive move to knock RIM. Second, Apple has no incentive to reduce price. They are struggling to keep up with demand already. Why create more demand only not to be able to satisfy it? Discussions of reducing price aren't founded in supply-side reality.
post #23 of 55
When faced with further scrutiny she replied, "Trust me, I'm an investment banker"
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post #24 of 55
Quote:
Originally Posted by cvaldes1831 View Post

Katy Huberty's track record is horrible. She is not a StarMine-rated overachiever.

AppleInsider really show not be referring to her predictions, as well as those from Shaw Wu, Gene Munster, Gartner, and Enderle. Her Apple predictions are garbage; she does not understand this company nor market.

You would be shocked to see how many of the most highly touted "crystal ball gazers" (analysts, fund managers, etc) end yup getting everything wrong, yet still have a job and are constantly appearing on national TV. A peer of mine created a spreadsheet of annual predictions by these "titans of Wall Street" and based on twelve asset allocation areas, only one got over two areas correct! Pathetic.

It is also interesting to note how many of these clowns were touting Europe as a solid and reasonably growth opportunity just two months ago. Now it's like Marvin in the movie Wall Street: "We're getting out NOW!"
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post #25 of 55
Quote:
Originally Posted by BUSHMAN4 View Post

Katy Huberty jumping on board and is one of the last to join the 300 club, Until we see things improving in europe the U.S. market is not going higher and neither is APPLE.

By the way I don't see a time frame in her prediction. So she's calling for $400 by when???



The thing is that if in this climate Apple continues to grow revenue and its coffers swell still further, it may well be that investors looking for a major brand to invest in will give Apple a serious look.

Apple weathered last fall's downturn in part because it wasn't dependent on the banking sector, being as Apple has its own money, and because today's average consumer would rather go without food and water than part with their cell phones.

You would think that a high-tech company selling higher-priced products would be hurt by a weak economy but people will not start their belt-tightening with their gadgets. Not this generation of consumers.

As long as the good numbers just keep on coming, Apple's stock will go higher. So how you deal wth AAPL as an investor hinges on what you believe is going to happen with the overall financials. If you think they can keep it up, it's a good place to stay invested. If not, time to take your profits and run. Maybe I'll regret sticking with them but I believe there is more upside in Apple still and that the company is making money in a clear, logical manner. By that I mean, it's not a smoke and mirrors sort of thing ala Enron. Apple sells millions of units at a profit. The company continues to innovate and tap into new revenue sources yet remains a well-controlled operation, not branching out with no sense of direction.

I don't even think losing Steve Jobs would slow the company down (there would be an initial hit to the stock but it would be a short-lived drop) at least not for a few years on account of the company's strategy for the next few years is well defined.

I bought in when the stock was at $27 and have owned shares in the company since. It's been a great ride and while I know that there is a danger I might stay in too long, so far that hasn't been the case.
post #26 of 55
Quote:
Originally Posted by justflybob View Post

You would be shocked to see how many of the most highly touted "crystal ball gazers" (analysts, fund managers, etc) end yup getting everything wrong, yet still have a job and are constantly appearing on national TV.

No, I'm not surprised at all.

I've largely given up listening to anyone who's not a five-star rated analyst and even those guys make errors (the StarMine ratings are graded on a curve). Even consensus views are dubious as these guys don't seem to agree on anything.

I wish that AppleInsider would quote the four- or five-star analysts, not blathering fools like Huberty.
post #27 of 55
Quote:
Originally Posted by delreyjones View Post

Congratulations, your timing was good. But are you ever planning to get back in with that money? Are you planning to do well by recognizing the peaks and valleys as they happen, or have you taken your profit for good because Apple's growth potential no longer looks as strong as it previously did?

I can't say what the future looks like. As for now, Apple's price appears to be reasonable to me in light of their current situation. I'm buying undervalued stocks right now.

If that situation changes, I may buy in again.
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post #28 of 55
I've been saying since April that they're stock will slam dunk at $450.

Apple is not infallible, but I'm strongly convinced that the best is yet around the corner for the company...
post #29 of 55
Quote:
Originally Posted by jragosta View Post

Unfortunately, it is generally the case that when the entire market is behind something, it falls off a cliff. When EVERYONE is bullish, it's time to sell, or at least hedge your bets (I sold about 1/2 my AAPL at 270).

Now, if Enderle starts saying something positive about Apple, then it's DEFINITELY time to sell.

And looking at Apple's performance relative to the huge dip we've suffered in the stock market due to governmental changes in the US and economic troubles in Europe, if not for that factor this would have been a bad move for you. Apple would certainly be higher than 270. Saying, "I sold because I anticipated the drop back to around DOW 10,000" would be impressive. What you're saying just demonstrates that you got lucky (temporarily) but not that you did something intelligent.

Apple has massive growth potential through the iPad, and also through the iPhone through other countries and carriers going forward. This ignores every other aspect of their business. Unless something terrible happens, Apple will continue to grow, and so will their stock (assuming other factors are balanced—global changes to the stock market change the game for reasons unrelated to Apple's stock).

Edit: That said, analysts are morons.
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post #30 of 55
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Originally Posted by JeffDM View Post

Huberty was the farthest off the last couple times her AAPL predictions were made, so it's well worth waiting and seeing.

Good point, but then again, she has been one of the chief AAPL skeptics, so having her come to the party might be a significant development.

BTW, not that anyone at AI will care, but the term "AAPL stock" which is used so often in AI stories is a redundancy, since AAPL means "Apple stock" all by itself.
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post #31 of 55
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Originally Posted by Carmissimo View Post

Apple weathered last fall's downturn in part because it wasn't dependent on the banking sector, being as Apple has its own money, and because today's average consumer would rather go without food and water than part with their cell phones.

Forgetting for a moment that AAPL was slammed by a 60% drop in value at the lowest point in the overall market crisis. The fact that the stock recovered fairly quickly had nothing to do with their cash reserves (did they have to spend any of it to get through those months?), and everything to do with being able to show continued growth in earnings.

Quote:
Originally Posted by Xian Zhu Xuande View Post

And looking at Apple's performance relative to the huge dip we've suffered in the stock market due to governmental changes in the US and economic troubles in Europe, if not for that factor this would have been a bad move for you. Apple would certainly be higher than 270. Saying, "I sold because I anticipated the drop back to around DOW 10,000" would be impressive. What you're saying just demonstrates that you got lucky (temporarily) but not that you did something intelligent.

Apple has massive growth potential through the iPad, and also through the iPhone through other countries and carriers going forward. This ignores every other aspect of their business. Unless something terrible happens, Apple will continue to grow, and so will their stock (assuming other factors are balanced—global changes to the stock market change the game for reasons unrelated to Apple's stock).

Edit: That said, analysts are morons.

I agree. Even professional stock pickers have an extremely difficult time choosing when to get out of and into stocks, and missing ideal timing even by a small degree negates the advantage of holding through corrections. Very few sell-professed market timers actually calculate how they would have done over time had they simply held the stocks they like through corrections. This gives them the illusion that they have done well by the strategy, when it is highly likely that they have not.
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post #32 of 55
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Originally Posted by Dr Millmoss View Post

Forgetting for a moment that AAPL was slammed by a 60% drop in value at the lowest point in the overall market crisis. The fact that the stock recovered fairly quickly had nothing to do with their cash reserves (did they have to spend any of it to get through those months?), and everything to do with being able to show continued growth in earnings.

They never had to spend any cash during the recession. They were profitable the entire time and exceed the rest of the industry by a large margin.

I can't remember the last time Apple posted an unprofitable quarter. Before the iPod? Late Nineties?
post #33 of 55
AAPL market cap is within $6.5 Billion of MSFT


MSFT $*233,027,640,585.60

AAPL $*226,571,889,379.50

.
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post #34 of 55
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Originally Posted by Dick Applebaum View Post

AAPL market cap is within $6.5 Billion of MSFT


MSFT $*233,027,640,585.60

AAPL $*226,571,889,379.50

.

That's nice and as a stockholder I'm very happy, but the better gauge of how things have changes will be when Apple is also making more revenue per quarter.

I won't even discuss making more profit per quarter as MS' software puts them so far ahead of Apple in that sense that it's no even funny. People forget how much larger the profit margin is with SW v. HW.
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post #35 of 55
Quote:
Originally Posted by cvaldes1831 View Post

They never had to spend any cash during the recession. They were profitable the entire time and exceed the rest of the industry by a large margin.

I can't remember the last time Apple posted an unprofitable quarter. Before the iPod? Late Nineties?

That would be my point. Cash reserves have little practical value unless they are spent on expanding the business, or used to make up for cash flow if it goes negative.
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post #36 of 55
Quote:
Originally Posted by Xian Zhu Xuande View Post

And looking at Apple's performance relative to the huge dip we've suffered in the stock market due to governmental changes in the US and economic troubles in Europe, if not for that factor this would have been a bad move for you. Apple would certainly be higher than 270. Saying, "I sold because I anticipated the drop back to around DOW 10,000" would be impressive. What you're saying just demonstrates that you got lucky (temporarily) but not that you did something intelligent.

Or, more likely, that I obviously know more about stock picking than you do. Pigs get slaughtered.

I've been tracking my investments for over a decade - and beat the S&P 500, Nasdaq, and Dow Jones by an average of 5% per year over that time frame. That's HUGE. I think I'll pass on taking stock advice from you.
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post #37 of 55
Apple won't be hitting the $400. The DJIA will continue to upset the stocks due to its fluctuating habbits. Not stability until the Amero is mainstream.

Apple increments product features one bite at a time...hence the logo. Want the next big thing? You're gonna have to pick another fruit from the Apple Tree.

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post #38 of 55
Quote:
Originally Posted by BUSHMAN4 View Post

Katy Huberty jumping on board and is one of the last to join the 300 club, Until we see things improving in europe the U.S. market is not going higher and neither is APPLE.

By the way I don't see a time frame in her prediction. So she's calling for $400 by when???

...until the twelfth of never-- and that's a long, long time!

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post #39 of 55
Quote:
Originally Posted by Dick Applebaum View Post

AAPL market cap is within $6.5 Billion of MSFT


MSFT $*233,027,640,585.60

AAPL $*226,571,889,379.50

.

And the good news for AAPL is that MSFT is not a moving target. Pretty much flat for many years now. Why? No new ideas.

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post #40 of 55
Quote:
Originally Posted by solipsism View Post

That's nice and as a stockholder I'm very happy, but the better gauge of how things have changes will be when Apple is also making more revenue per quarter.

I won't even discuss making more profit per quarter as MS' software puts them so far ahead of Apple in that sense that it's no even funny. People forget how much larger the profit margin is with SW v. HW.

one key difference.

Apple revenue, profit and market share are all going UP.

Microsoft is pretty stagnant.
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