Continued iPhone growth could push Apple stock to $400

Posted:
in AAPL Investors edited January 2014
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."
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Comments

  • Reply 1 of 54
    anantksundaramanantksundaram Posts: 18,748member
    400? It'll be worth more than Exxon-Mobil.
  • Reply 2 of 54
    steviestevie Posts: 956member
    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?
  • Reply 3 of 54
    bushman4bushman4 Posts: 797member
    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???
  • Reply 4 of 54
    lkrupplkrupp Posts: 6,530member
    Let's not get too intoxicated by these predictions. Apple executes better than most but they are not infallible.
  • Reply 5 of 54
    monstrositymonstrosity Posts: 2,180member
    The growth potential is there without a shadow of a doubt.
  • Reply 6 of 54
    maxmannmaxmann Posts: 85member
    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..
  • Reply 7 of 54
    jragostajragosta Posts: 10,473member
    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.
  • Reply 8 of 54
    garamondgaramond Posts: 107member
    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.
  • Reply 9 of 54
    sheffsheff Posts: 1,407member
    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.
  • Reply 10 of 54
    bklynkidbklynkid Posts: 36member
    Sounds good to me, bring it AAPL!
  • Reply 11 of 54
    aaarrrggghaaarrrgggh Posts: 1,564member
    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.
  • Reply 12 of 54
    delreyjonesdelreyjones Posts: 318member
    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?
  • Reply 13 of 54
    anantksundaramanantksundaram Posts: 18,748member
    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?
  • Reply 14 of 54
    jeffdmjeffdm Posts: 12,946member
    Huberty was the farthest off the last couple times her AAPL predictions were made, so it's well worth waiting and seeing.
  • Reply 15 of 54
    aaarrrggghaaarrrgggh Posts: 1,564member
    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.
  • Reply 16 of 54
    SpamSandwichSpamSandwich Posts: 30,251member
    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.
  • Reply 17 of 54
    zindakozindako Posts: 468member
    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.
  • Reply 18 of 54
    neilmneilm Posts: 548member
    By "hardware cost" (Y axis of the graph) Huberty presumably is trying to say "hardware retail price."
  • Reply 19 of 54
    markbmarkb Posts: 153member
    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.
  • Reply 20 of 54
    cvaldes1831cvaldes1831 Posts: 1,832member
    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.
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