iPhone predicted to drive Apple stock to $235

Posted:
in General Discussion edited January 2014
A new report predicts Apple stock will break past the $200 milestone, riding high on the successful and profitable iPhone, even as the company's other businesses are predicted to lose value.



In a note to investors, Charlie Wolf of Needham & Co. said he believes AAPL will trade at $235 in the next 12 months, and will be driven to that price solely on the strength of the iPhone. Specifically, he believes that the "explosive growth" of the App Store will lead to a higher trajectory of iPhone adoption.



Though the iPhone is already the most profitable portion of Apple's business, Wolf believes it will become even more dominant for the company. In his old prediction of a $200 trading price, Wolf viewed the iPhone as $70.18, or 35.1 percent of the stock price's share. Now, he sees the iPhone as $134.07, or 58.3 percent of the total share price. And the fact that the iPhone only controls 12.5 percent of the smartphone market means there is huge potential for growth.



"By exploiting a commanding lead in the all-important smartphone applications market, the iPhone is in a position to chalk up share gains in this fast-growing market that could surprise everyone," Wolf wrote. "In many respects, Apple and Amazon are in similar positions. Amazon holds a relatively small but growing share of the e-commerce market, which itself is small, but growing an order of magnitude faster than the physical retail market."







Part of Wolf's optimism for the App Store stems from changes made by Apple at its recent media event. In the past, Wolf was critical of the difficulty in finding new software for the iPhone. But with iPhone OS 3.1, a "Genius" recommendation system will suggest new software for users, based on what they have already downloaded. Wolf said he sees the change as a first step, but still a positive one.



"Based on these developments since our January valuation analysis, we have upped the number of iPhones that will be sold in 2018, the final year in our model, from 67 million to 107 million," he said. "Our forecast has the phone capturing 20 percent share of the smartphone market in that year, up from 12.5 percent recently. We should note that the iPhone's share of the worldwide market is already around 12.5 percent. So our forecast is by no means an aggressive one."



However, the report also reduced the forecast of future iPod sales as the music player market continues to shrink. From an initial estimated 468 million users, Wolf now believes there will be an install base of 333 million portable music players in 2018. He believes that smartphones will begin to take over that category.



"Until the emergence of converged devices, growth in hte music player market had traced the classic innovation S-curve trajectory," he said. "We continue to estimate that the iPod will maintain a 60 percent share of the worldwide market."



«13

Comments

  • Reply 1 of 51
    MacProMacPro Posts: 17,866member
    Here's hoping ....
  • Reply 2 of 51
    I can't see why Macintosh should decrease. Last time I checked, Mac revenue wasn't decreasing. Actually, it's doing great in the current economy.
  • Reply 3 of 51
    jon tjon t Posts: 131member
    I assume his message is just that iPhone is going to dwarf everything else - even very good Mac growth.





    In a year he'll be redefining it with a tablet also going like crazy. http://forums.appleinsider.com/images/smilies/1wink.gif
  • Reply 4 of 51
    Quote:

    we have upped the number of iPhones that will be sold in 2018, the final year in our model, from 67 million to 107 million," he said.





    How can anyone predict about 2018??? Damn these analysts!!
  • Reply 5 of 51
    Quote:
    Originally Posted by aToMac View Post


    I can't see why Macintosh should decrease. Last time I checked, Mac revenue wasn't decreasing. Actually, it's doing great in the current economy.





    On the convergence part, (Anecdotal, I know. ) I just gave my 3rd gen Nano (red) to my sister because the 3GS iPhone now has Nike+ in it for my running. (If you haven't tried the Nike+, it is well worth it)



    And I gave my MacBook to my daughter for Medical School. Again, because the 3GS iPhone has replaced about 95% of what I had to do on a laptop!
  • Reply 6 of 51
    I'd like to believe that $235 figure and I'd be satisfied to see Apple break the $200 mark before the end of the year. Hopefully iPhone sales will surpass 8 million units this quarter even not counting China Unicom sales. The iPod Nano looks like it will be a solid holiday hit. In a way, I'm somewhat glad the Touch didn't have a camera in it this year. It might have stolen the Nano's thunder. Apple should wait until after the new year to introduce a Touch with video recording to continue iPod sales after the holidays.



    The one thing that will make me extremely happy is that Apple is able to keep it's share price rising without building a netbook. I hate listening to analysts go on and on about how much Apple is missing out on not building some $300 netbook for the cheapster crowd. I personally think Apple would be committing financial suicide to compete in that sector. As an Apple investor, I'm mainly concerned about about profit margins than I am in market share. Apple can easily thrive with about 20% desktop market share and still make huge amounts of money if they continue making devices that are high in demand in the mobile sector. Apple should continue to focus on people that are willing to spend money on the Apple brand and good customer service. Apple needs to get that rumored tablet into the educational market and make multimedia content delivery the killer feature.



    Good luck to fellow investors and let's hope that this $235 target price isn't another pipe dream as it was back in late 2007.
  • Reply 7 of 51
    Quote:
    Originally Posted by Chintan100 View Post


    How can anyone predict about 2018??? Damn these analysts!!



    Yeah. From what I've heard, we're all going to die on December 21, 2012

  • Reply 8 of 51
    Quote:
    Originally Posted by Constable Odo View Post


    The one thing that will make me extremely happy is that Apple is able to keep it's share price rising without building a netbook. I hate listening to analysts go on and on about how much Apple is missing out on not building some $300 netbook for the cheapster crowd. I personally think Apple would be committing financial suicide to compete in that sector. As an Apple investor, I'm mainly concerned about about profit margins than I am in market share. Apple can easily thrive with about 20% desktop market share and still make huge amounts of money if they continue making devices that are high in demand in the mobile sector. Apple should continue to focus on people that are willing to spend money on the Apple brand and good customer service. Apple needs to get that rumored tablet into the educational market and make multimedia content delivery the killer feature.



    Excellent points! I agree Apple should not provide a cheap net book and the Tablet sounds to me like an innovative alternative while reshaping a segment of the market as only Apple is able to do.
  • Reply 9 of 51
    The Mac share of the stock price might fall but the actual dollar number should not. Unless he is actually expecting revenue and profits from the Mac business to fall. I highly doubt that proposition. Does the term 'analyst' refer to where they pull their numbers from?
  • Reply 10 of 51
    irelandireland Posts: 17,521member
    Wolf sees a full moon tonight.
  • Reply 11 of 51
    melgrossmelgross Posts: 31,323member
    This does follow Jobs's statement years ago that if he were back at Apple he would milk the Mac for all it was worth and then move on to the next big thing.



    I don't see anything wrong in what Wolf is saying here.
  • Reply 12 of 51
    Quote:
    Originally Posted by Ireland View Post


    Wolf sees a full moon tonight.



    Maybe 3 wolves, 1 moon?
  • Reply 13 of 51
    Quote:
    Originally Posted by nite41 View Post


    Yeah. From what I've heard, we're all going to die on December 21, 2012



    Not all of us, only those chosen for sacrifice.
  • Reply 14 of 51
    Quote:
    Originally Posted by christopher126 View Post


    On the convergence part, (Anecdotal, I know. ) I just gave my 3rd gen Nano (red) to my sister because the 3GS iPhone now has Nike+ in it for my running. (If you haven't tried the Nike+, it is well worth it)



    And I gave my MacBook to my daughter for Medical School. Again, because the 3GS iPhone has replaced about 95% of what I had to do on a laptop!



    While iPhones may replace Macs for a small percentage of the population...

    Macs will replace PCs for a much, much, much larger percentage of the population.

    50% of Apple Retail Store Mac sales are to Windows switchers.

    That stat has held true for years now and will continue for years to come.
  • Reply 15 of 51
    Quote:
    Originally Posted by melgross View Post


    This does follow Jobs's statement years ago that if he were back at Apple he would milk the Mac for all it was worth and then move on to the next big thing.



    I don't see anything wrong in what Wolf is saying here.



    The iPhone is just an evolution of the Mac platform.

    It is the Mac optimized for handheld use.



    It will never completely replace the Mac but the tech will cross-pollinate.

    For example, the Mac Book Pros have multitouch in their trackpads.

    Core Animation was originally developed for the iPhone and later found its way into the Mac OS.
  • Reply 16 of 51
    Quote:

    But with iPhone OS 3.1, a "Genius" recommendation system will suggest new software for users, based on what they have already downloaded. Wolf said he sees the change as a first step, but still a positive one.



    is it just me, or is genius a failure? i have yet, for music and now for apps, to recommend or group things as it claims it should. really disappointing. for music, i will stick to last.fm. for apps, i will stick to being lost looking for a needle in a hey stack.
  • Reply 17 of 51
    Quote:
    Originally Posted by aToMac View Post


    I can't see why Macintosh should decrease. Last time I checked, Mac revenue wasn't decreasing. Actually, it's doing great in the current economy.



    He doesn't break out his forecasts for Mac sales by units or dollars (at least they aren't included here), but I don't think he is predicting that Mac sales will decline overall, only as a percentage of Apple's total revenue, because the iPhone segment is growing so rapidly.
  • Reply 18 of 51
    Quote:
    Originally Posted by Dr Millmoss View Post


    He doesn't break out his forecasts for Mac sales by units or dollars (at least they aren't included here), but I don't think he is predicting that Mac sales will decline overall, only as a percentage of Apple's total revenue, because the iPhone segment is growing so rapidly.



    I'm not sure how it could be read any other way. The numbers show a 60% decline in value per share for Macs. There are only two possible inferences from that:

    1- either he believes there will be a 60% decline in Mac sales

    2 - or, he believes that Apple will somehow give the perception that Macs are worth 60% less to stockholders.



    I don't believe either, and would add the $29 back on top of the $235 to get a more realistic prediction.



    Am very please to see, for once, that a predicted share price has a time frame attached to it.
  • Reply 19 of 51
    Quote:
    Originally Posted by orange whip View Post


    I'm not sure how it could be read any other way. The numbers show a 60% decline in value per share for Macs.



    I think you are reading this wrongly. What he is saying is that Mac profits will represent a smaller piece of a growing share price, i.e., iPhone revenues are growing much faster that Mac revenues, which is true. I think he might be too negative on Mac sales, but it's really impossible to tell, since no numbers are included. (Possibly this was in the full report, but we're not seeing it here.)



    As for the share price prediction timeframe, these are always for 12 months.
  • Reply 20 of 51
    Aw shucks - after 70% price appreciation in AAPL shares from March to the present, if Wolf prophesies correctly that means I'll have to settle for just another 30% between now and next September! Ah, well ...



    Wolf knows that every new iPhone sold in the U.S. with a two-year AT&T contract pays roughly another $400 phone subsidy immediately into Apple's coffers as deferred subscription revenue, reported as GAAP earnings in quarterly increments over the next 24 months. It's like movie stars who negotiate a share of the gross in blockbuster films - a gift that keeps giving. The deferred revenue effect is enormous and shields AAPL from severe declines in the event a major product line chokes up or a new product introduction bombs. Neither of those scenarios is likely, however.



    In other words, downside risk continues to diminish as long as iPhone sales momentum continues and grows. A year ago, the few analysts who forecast share prices reaching $200 were called lunatics. Today, the name-callers have been left in the dust.



    Will it always be this way? Obviously not, unless Apple unveils another conceptual game-changer like the iPod, iTunes or iPhone. Further share gains following a history of aggressive price appreciation are always harder to attain. At some point AAPL will plateau. Having bought in at the century mark nearly 12 months ago - I'm happy, holding and watching. Probably will sell and claim long-term capital gains somewhere within the next year.
Sign In or Register to comment.