Barclays puts $385 target on Apple, sees 150M FaceTime devices by 2012

Posted:
in AAPL Investors edited January 2014
British investment bank Barclays Capital on Tuesday raised its price target on shares of Apple by more than 10% to $385 per share, citing strength in all four of the company's core product segments and expectations it will build a network of 150 million FaceTime-enabled devices over the next two years.



"We are raising our estimates and target for Apple to reflect our view that the company is seeing strong demand not only for the iPad and the iPhone 4 but also for Macs and new iPods," analyst Ben Reitzes wrote in a note to clients. "Long-term, we are excited about Apple?s potential to grow via networked devices through FaceTime, which we expect to be enabled on all Apple devices over time."



More specifically, the analyst is projecting Apple to sell almost 40 million FaceTime compatible iPhones in fiscal 2011, 15 million FaceTime compatible iPods, and 8 million FaceTime compatible iPads ? for a total installed base of over 63 million FaceTime devices by the end of the fiscal year.



"That?s a nice start to create a powerful networking effect," he wrote. "In [fiscal 2012] we see that figure jumping to an installed base of over 150 million FaceTime enabled devices, which could prove conservative if FaceTime is put in all iPads and all Macs."



Introduced this past summer alongside the iPhone 4, FaceTime is Apple's open standard for conducting video conferencing across devices using WiFi and VOIP, and capable of switching from a cellular connection to a video seamlessly. Users only need to register an Apple ID and own a supporting product to make use of the technology.



Given Apple?s high share among college students, Reitzes said he envisions a world where an entire campus could eventually communicate in some way using FaceTime on a device if desired. And while he believes Google's Android platform can do a "good job" with a similar type of feature, it seems that Apple is offering more of a complete package to make FaceTime grow into a multiplier for its device sales through vertical integration.



"We believe the 'FaceTime networking effect' could provide a halo effect on Macs and iPads once the feature becomes available," the analyst wrote. "Note that FaceTime is an 'open standard' so if Apple is successful in making this feature ubiquitous, more non-Apple devices could be made compatible in the future."



Reitzes also acknowledge Apple's diligence in its implementation of the FaceTime standard thus far, making it mandatory to conduct video conferencing rather than just voice. "Obviously, carrier partners would not want FaceTime to provide a one- button VOIP option that would be a much more affordable voice option for Apple customers," he explained. "As a result, over time Apple could arguably remake voice calling if it chose to ? through FaceTime ? allowing customers to make calls through VOIP easily (over WiFi or a 3G/4G network)."







Reinforcing their convictions, Reitzes and his team raised their per-share earnings estimates for Apple through fiscal 2011, driven by prospects for higher margins and significantly higher iPad sales -- thanks to improved production and distribution -- into the fourth quarter and higher iPhone sales.



They now estimate fiscal 4Q per share earnings of $4.05 (up from $3.91), based on 59% year-over-year revenue growth to $19.45 billion (up from $19.2 billion) and gross margin of 37.3% (up from 36.8%). Their 4Q estimates include Mac unit growth of 23% year-over-year to 3.75 million (unchanged), an iPod unit decline of 8% year-over-year to 9.4 million (unchanged), iPhone units of 12.8 million (unchanged) and 4.8 million iPad units (up from 4.3 million).



For all of fiscal 2010, they're estimating per share earnings of $14.56 (up from $14.43) based on 50% year-over-year revenue growth to $64.3 billion (up from $64 billion). Meanwhile, their fiscal 2011 per share earnings estimates rise to $17.80 (from $16.92) based on 27% year-over-year revenue growth to $81.8 billion (up from $79.4 billion) and gross margin of 38.4% (up from 37.9%).



"Even at this market cap, we continue to believe Apple is the best growth play in the IT Hardware segment ? with prospects for significant double digit organic revenue growth for several more years," Reitzes wrote. His new price target on shares of the company stands at $385 (up from $340), representing 15x his fiscal year non-GAAP EPS estimate of $20.80, excluding interest income but adding back cash.
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Comments

  • Reply 1 of 38
    solipsismsolipsism Posts: 25,726member
    Quote:
    Originally Posted by AppleInsider View Post


    More specifically, the analyst is projecting Apple to sell almost 40 million FaceTime compatible iPhones in fiscal 2011, 15 million FaceTime compatible iPods, and 8 million FaceTime compatible iPads – for a total installed base of over 63 million FaceTime devices by the end of the fiscal year.



    Really?
    • That is 3.33 million iPhones per month

      (Isn’t that slightly under what they are doing now?)



    • That is 0.88 million iPads per month, assuming another April release for the iPad with FaceTime

      (Aren’t they doing about 3 million per month now?)



    • That is 1.25 million iPod Touches per month

      (Aren’t they on par with the iPhone unit sales?)

  • Reply 2 of 38
    Quote:
    Originally Posted by solipsism View Post


    Really?
    • That is 3.33 million iPhones per month

      (Isn?t that slightly under what they are doing now?)



    • That is 0.88 million iPads per month, assuming another April release for the iPad with FaceTime

      (Aren?t they doing about 3 million per month now?)



    • That is 1.25 million iPod Touches per month

      (Aren?t they on par with the iPhone unit sales?)




    Pssst! Hey!... No one really expected you to analyze the analysts! Now you've gone and done it. Their illusion of competancy is shattering!
  • Reply 3 of 38
    solipsismsolipsism Posts: 25,726member
    Quote:
    Originally Posted by SpamSandwich View Post


    Pssst! Hey!... No one really expected you to analyze the analysts! Now you've gone and done it. Their illusion of competancy is shattering!



    The real shocker would have been if they would have had figures that actually made some sort of sense.
  • Reply 4 of 38
    Unless Facetime gets on non-Apple platforms it is not going to succeed. We already have a Yahoo app that offers video chat on iPhones, Android phones and PCs/Macs with anexisting large user base. I wouldn't be surprised to see MSN, GTalk and Skype quickly follow and maybe Facebook will join in as well.
  • Reply 5 of 38
    asdasdasdasd Posts: 5,317member
    Quote:
    Originally Posted by solipsism View Post


    Really?
    • That is 3.33 million iPhones per month

      (Isn’t that slightly under what they are doing now?)



    • That is 0.88 million iPads per month, assuming another April release for the iPad with FaceTime

      (Aren’t they doing about 3 million per month now?)



    • That is 1.25 million iPod Touches per month

      (Aren’t they on par with the iPhone unit sales?)


    • I think you are right on the iPhones. Expect more.



    • The FaceTime enabled iPads would not be the present model - they are assuming that that model comes in later in the year.



    • - iPod sales are about 10M a quarter, except for the holiday quarter. Apple doesnt break the ipods down into the different models, but looking at ASP most analysts believe that the touch is about 50-60%. So that is up to 6 million a quarter which is below iPhone sales.






  • Reply 6 of 38
    Shouldn't they split the shares in two or three ( $100 value/share ), like five-zeven years back?
  • Reply 7 of 38
    Quote:
    Originally Posted by lord anubis View Post


    Shouldn't they split the shares in two or three ( $100 value/share ), like five-zeven years back?



    Nope. Splits are little more than a gimmick.
  • Reply 8 of 38
    MacProMacPro Posts: 18,367member
    This could well be too conservative.



    BTW IMHO Splitting isn't a gimmick totally. There are sound reasons why it is done (explained many times here before). Then, who am I to argue with such experts that says it is.
  • Reply 9 of 38
    MacProMacPro Posts: 18,367member
    Quote:
    Originally Posted by lord anubis View Post


    Shouldn't they split the shares in two or three ( $100 value/share ), like five-zeven years back?



    There are definitely some sales benefits to splitting even as we know, (sigh) the numerical value isn't changed. I actually feel letting the pps get this high is a Google effect and has some snobbery attached to it.
  • Reply 10 of 38
    Quote:
    Originally Posted by lord anubis View Post


    Shouldn't they split the shares in two or three ( $100 value/share ), like five-zeven years back?



    Reducing the single share price does drive trading activity, including that of retail investors. Unlike old-school blue chips like General Electric, AAPL shares are mostly in the hands of institutional investors though, not the little aunt Millies of this nation.



    Increased trade activity does cause equities to be added to more index funds, etc. so indeed three shares of $100 stock are not the same as one share of $300 stock.



    Personally, I think that shareholder equity of AAPL is quite low and that the company is undervalued vis-a-vis ongoing increases in their profitability. This stock should really be trading at $400/share, not $300. That said, it still has outpaced every other S&P 500 component over the past five years.
  • Reply 11 of 38
    mj webmj web Posts: 918member
    What kind of morons raise earning targets after the fact? All investment bankers! Does this schmuck think AAPL is going to stagnate next year?
  • Reply 12 of 38
    Quote:
    Originally Posted by MJ Web View Post


    What kind of morons raise earning targets after the fact? All investment bankers! Does this schmuck think AAPL is going to stagnate next year?



    Actually, there is very little fact in the quoted analysis.



    We'll see more facts on Monday. However, Apple breaks out its numbers in ways where people still must guess some of the details (e.g., they do not separate iPod touch sales from other iPods, they don't break out sales by country).
  • Reply 13 of 38
    mj webmj web Posts: 918member
    Quote:
    Originally Posted by cvaldes1831 View Post


    Actually, there is very little fact in the quoted analysis.



    We'll see more facts on Monday. However, Apple breaks out its numbers in ways where people still must guess some of the details (e.g., they do not separate iPod touch sales from other iPods, they don't break out sales by country).



    That's why being a Wall Street analyst is the easiest job in America. All you got to get right is the spelling of your name. Always considered it the domain of nepots and mistresses.
  • Reply 14 of 38
    wigginwiggin Posts: 2,265member
    Quote:
    Originally Posted by Orlando View Post


    Unless Facetime gets on non-Apple platforms it is not going to succeed. We already have a Yahoo app that offers video chat on iPhones, Android phones and PCs/Macs with anexisting large user base. I wouldn't be surprised to see MSN, GTalk and Skype quickly follow and maybe Facebook will join in as well.



    I'm sure iChat will be updated, either independently or with the next OS upgrade to include Facetime. Maybe that's the secret new app in iLife? I also wouldn't be surprised to see it get somehow bundled with an upcoming update to the PC version of iTunes just to get it in more people's homes to support usage of it on Apple's mobile devices. Either that or someone will make a PC version once Apple releases the standard for use by 3rd parties. Finally, I suspect a future update to the AppleTV software will support plugging in a web cam to the USB port so you can do Facetime from your living room. That would be a reason for getting grandma and grandpa an AppleTV even if they never use any of it's other features.
  • Reply 15 of 38
    Quote:
    Originally Posted by Orlando View Post


    Unless Facetime gets on non-Apple platforms it is not going to succeed. We already have a Yahoo app that offers video chat on iPhones, Android phones and PCs/Macs with anexisting large user base. I wouldn't be surprised to see MSN, GTalk and Skype quickly follow and maybe Facebook will join in as well.



    It will, but in typical Apple Style they must make sure they have it first on all their devices before they release the standard allowing others to build for it as well. Hopefully the iPad will be last refresh before they release it, there are plenty of companies ready to adopt it into their software and since it would be a protocol (not a service) it should be something that existing video services can tie into. Imagine being able to Video Skype with Yahoo users or MSN video with gmail users, these are the sorts of things that would be possible if these companies build in support for FaceTime protocols.



    FaceTime, like existing iChat video chat, doesn't need a server but creates a direct computer to computer connection. All it needs is some initial way to establish contact between the 2 computers, which means that can be done through all kinds of services & not just an IM service. E-mail, SMS, Jabber, MSN, AOL, Yahoo, Gadu-Gadu, IRC, ICQ...the list could go on & on, possibilities are limited to application support & not service/server support so as long as users have software that utilizes the protocol a connection should be possible.
  • Reply 16 of 38
    solipsismsolipsism Posts: 25,726member
    Quote:
    Originally Posted by Wiggin View Post


    I'm sure iChat will be updated, either independently or with the next OS upgrade to include Facetime. Maybe that's the secret new app in iLife? I also wouldn't be surprised to see it get somehow bundled with an upcoming update to the PC version of iTunes just to get it in more people's homes to support usage of it on Apple's mobile devices. Either that or someone will make a PC version once Apple releases the standard for use by 3rd parties. Finally, I suspect a future update to the AppleTV software will support plugging in a web cam to the USB port so you can do Facetime from your living room. That would be a reason for getting grandma and grandpa an AppleTV even if they never use any of it's other features.



    I think adding it to iLife makes sense. Waiting a year or more after Apple demos Mac OS X 10.7 with iChat with FaceTime won't do us or them any favours.



    I wouldn't think they'd make a Windows version. If they were going to do that then I'd think they would have kept FaceTime locked and protected.
  • Reply 17 of 38
    From Investopedia...



    The bottom line is a stock split is used primarily by companies that have seen their share prices increase substantially and although the number of outstanding shares increases and price per share decreases, the market capitalization (and the value of the company) does not change. As a result, stock splits help make shares more affordable to small investors and provides greater marketability and liquidity in the market.
  • Reply 18 of 38
    flaneurflaneur Posts: 4,515member
    Quote:
    Originally Posted by Wiggin View Post


    I'm sure iChat will be updated, either independently or with the next OS upgrade to include Facetime. Maybe that's the secret new app in iLife? I also wouldn't be surprised to see it get somehow bundled with an upcoming update to the PC version of iTunes just to get it in more people's homes to support usage of it on Apple's mobile devices. Either that or someone will make a PC version once Apple releases the standard for use by 3rd parties. Finally, I suspect a future update to the AppleTV software will support plugging in a web cam to the USB port so you can do Facetime from your living room. That would be a reason for getting grandma and grandpa an AppleTV even if they never use any of it's other features.



    The really, really big factor to consider is whether a live webcam will be connectable to the current iPad, either via Bluetooth or the Camera Connection Kit. Several have raised this question, especially in another AI FaceTime thread on Sept. 10, but I haven't seen anyone answer definitively that it will or will not be possible.



    Does anyone with developer insight care to speculate?
  • Reply 19 of 38
    kibitzerkibitzer Posts: 1,114member
    Quote:
    Originally Posted by MJ Web View Post


    Always considered it the domain of nepots and mistresses.



    Do you mean nepotists?
  • Reply 20 of 38
    Quote:
    Originally Posted by Kibitzer View Post


    Do you mean nepotists?



    I think he did, but I like the coinage of nepots better--kind cool! Sorta like nepotists are people who give out such favoritism, and nepots are the beneficiaries.
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