In a report to clients, Kaufman Bros. analyst Shaw Wu conceded to being a bit over-protective about the stock in recent months, even pulling it off his firm's focus list recently due to concerns that investors in a bear market wouldn't be willing to pay more than a 15x multiple for shares in quality hardware companies.
"However, it appears that investor sentiment has turned a bit more constructive and [they are] willing to pay for quality names as we have seen with Apple, Research in Motion, Google, and Amazon," he wrote. "Recently, both Juniper and F5 networks preannounced revenue misses but better profits, and investors rewarded both with higher stock prices."
Wu also said several catalysts in the months ahead are likely to help drive shares higher, starting with Apple's Worldwide Developers Conference in June that's widely expected to give way to a third-generation of iPhone handhelds running the company's new iPhone Software 3.0.
Another positive expected around the same time is the launch of Mac OS X 10.6 Snow Leopard, which should further fuel Mac sales that have already benefitted from the early March launch of new desktop models. Also factored into the analyst's view is the "potential for a new form factor, perhaps Apple's answer to the netbook, with a large screen iPod touch-Mac hybrid."
Other catalysts could include lower service plan pricing for the next-gen iPhone models and an AppleTV update, he added. Wu raised his price target on Apple shares to $152 from $120, assuming a 19x multiple on his calendar 2009 free cash flow estimate of $8.
"The bottom line is that even though Apple greatly outperformed, up 45 percent since late November vs. a 20 percent return in the NASDAQ and 7 percent in the S&P 500, in the same time period, we believe there is still room for sizable upside as investors gain more confidence and Apple trades closer to its 'normal' 20x-25x multiple," he wrote. "We find Apple's stock performance impressive in light of it sporting one of the largest market capitalizations in technology."
Similarly, Caris & Co. analyst Robert Cihra also used a research note Monday to raise his price target on Apple from $120 to $150 per share. He told clients that he believes the Cupertino-based company is shaking up the billion-unit cell phone industry with its near $1 billion App Store business, which may be under-appreciated by investors.
Cihra also spoke favorably of upcoming iPhone production builds and said it's possible Apple is working on an answer to the Netbook market through a device that will look like a "7-inch iPhone."
"In particular, with Windows 7 now set to add native touchscreen support, including multi-finger touch, we imagine Apple will want to have a competing large-screen touch Mac computing platform, particularly given its own in-house capacitive touch- sensing technologies," he wrote. "In contrast to today’s netbooks, which are essentially de-spec’d notebooks, Apple doesn’t do cheap, Apple does different."
After bleeding more than 55 percent of their value to fall from a high of $192.24 to $85.35 during the back half of 2008, shares of Apple are up more than 40 percent since the start of the new year, currently trading at $120.12 on the Nasdaq stock market.