New products, 'innovative services' lead Barclays to hike Apple price target by 17% to $140

Posted:
in AAPL Investors edited December 2014
British banking giant Barclays this week raised its price target for Apple shares to $140 from $120, saying that increased customer demand for larger-screened iPhones and iPads, the introduction of the Apple Watch, and the unveiling of new services like Apple Pay could significantly expand the company's margins.


The New York Stock Exchange, credit Carlos Delgado via Wikipedia.


Barclays analyst Ben A. Reitzes made the change in a note to investors, a copy of which was provided to AppleInsider. Reitzes believes that Apple's share price is strongly correlated to its margins, and sees the new releases increasing those margins going forward.

Specifically, Reitzes feels that current margin estimates fail to properly account for the record-setting sales pace of the iPhone 6 series. The iPhone 6 was the top seller at each of the big four U.S. carriers in November, while the iPhone 6 Plus swept second place.

In addition, he sees the Apple Watch as a "high-margin" device, though it is unclear whether that is based on the announced pricing for the Sport model or on projections for the cost of the Apple Watch and Apple Watch Edition versions. Expectations for Apple Watch sales run the gamut from bearish to bullish, though Swiss bank UBS recently predicted that the Cupertino company could move as many as 24 million of the devices in fiscal 2015.

Finally, Reitzes cited Apple Pay and other "soon to be announced" digital services as sources of relatively low-overhead recurring revenue that would boost margins. Those other services are not named, but could include the rumored rebranding of Beats Music that is expected to come alongside a significant price cut for the streaming service.
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Comments

  • Reply 1 of 51

    The target prices' fever is on!

  • Reply 2 of 51
    doomed i tell ya. doomed.
  • Reply 3 of 51
    lkrupplkrupp Posts: 5,904member

    Yes, we AI fanboys want Apple to thrive forever but it is, after all, a business. Think of every well known, iconic, successful tech business and they all had their day in the sun, stumbled, recovered, stumbled again, and so forth (Microsoft, HP, Dell, Sony, Blackberry, Nokia, IBM). Apple has an unparalleled management team at this time, is firing on all cylinders, can do almost no wrong, and has a loyal customer base that other CEOs would sell their grandmothers into slavery to have. I hope it continues for a long time but nothing is forever. The long knives are always out, waiting for the stumble and the opportunity to attack the big guy when he’s down on one knee. 

  • Reply 4 of 51

    The race has officially started.  I guess the analyst that gives Apple the highest price target get some sort of a prize or honorable mention.  Normally Brian White always wins with his off-the-wall moonshots of calling ridiculously high numbers that no one else would be crazy enough to try and beat.  I'm going to sit back today and see how small a jump Apple's share price will likely rise.  Any other stock would make a huge jump but I'm willing to bet Apple's share price moves less than one percent based on that 17% increase of price target call.  It really doesn't matter because analysts are not the actual investors.  No group of investors except Carl Icahn wants Apple's share price to increase dramatically especially if they don't have enough money invested in Apple.  Most will be johnny-come-lately investors hoping to grab onto Apple's tail now that they've discovered Amazon isn't going anywhere.  Apple will have a very solid quarter and I'm sure some increased dividends will be forthcoming.  Apple is on fire but those talking heads at CNBC will try to douse the fire claiming how Apple has peaked and can go nowhere but down.  If Apple reaches $120 a share by the end of the year, I'll be more than satisfied.  Apple appears to have plenty of legs to run higher next year if the economy doesn't jump the tracks.  Lower gasoline and heating fuel prices will give consumers more money to spend on tech gadgets.

  • Reply 5 of 51
    radarthekatradarthekat Posts: 2,313moderator
    Quote:

    Originally Posted by lkrupp View Post

     

    Yes, we AI fanboys want Apple to thrive forever but it is, after all, a business. Think of every well known, iconic, successful tech business and they all had their day in the sun, stumbled, recovered, stumbled again, and so forth (Microsoft, HP, Dell, Sony, Blackberry, Nokia, IBM). Apple has an unparalleled management team at this time, is firing on all cylinders, can do almost no wrong, and has a loyal customer base that other CEOs would sell their grandmothers into slavery to have. I hope it continues for a long time but nothing is forever. The long knives are always out, waiting for the stumble and the opportunity to attack the big guy when he’s down on one knee. 


     

    Getting the big guy down on one knee is the first major hurdle.  It's interesting to me that Apple differs in that it's rise has meant the collapse of so many formerly market-leading competitors.  I don't know of another business that has been responsible for so much disruption of competition in multiple spheres.  Microsoft's rise certainly spelled the end for a few competitors in the CPM market, and some software businesses along the way, but nothing of the magnitude of Apple coming into the smartphone business and, over a period of years, decimating the businesses of Nokia and Blackberry (two of, if not the, leading companies in that realm), or the magnitude of the shift in the PC market with the rise of the iPad, defining the post-PC era, or the wholesale restructuring of the music business in the era of the iPod.  Getting this company to its knees will be some feat of competitive prowess.

  • Reply 6 of 51
    radarthekatradarthekat Posts: 2,313moderator

    Brian White is going to have to outdo Icahn's call for $200/share.  Then we'll know the battle has truly been joined.

  • Reply 7 of 51

    Are these the same people saying AAPL was overvalued when it was bouncing around $700/share pre-split? Accounting for the split, these targets put AAPL at ~$1000/share in pre-split pricing.

     

    P/E for AAPL is still around 18. Much lower than GOOG's 27, but very close to MSFT's 18.9. And way lower in price than AMZN which has negative earnings. And I suspect if you factor in AAPL's intrinsic value (their mountain of cash, facilities, patents, etc.) they are priced way lower than many of their closest peers.

     

    Long AAPL.

     

    - Jasen.

  • Reply 8 of 51
    apple ][apple ][ Posts: 8,360member

    I'm damn glad that I didn't have any stop losses in place.

     

    I bet that a ton of people got screwed and got taken out on monday.

  • Reply 9 of 51
    MacProMacPro Posts: 17,180member
    jasenj1 wrote: »
    Are these the same people saying AAPL was overvalued when it was bouncing around $700/share pre-split? Accounting for the split, these targets put AAPL at ~$1000/share in pre-split pricing.

    P/E for AAPL is still around 18. Much lower than GOOG's 27, but very close to MSFT's 18.9. And way lower in price than AMZN which has negative earnings. And I suspect if you factor in AAPL's intrinsic value (their mountain of cash, facilities, patents, etc.) they are priced way lower than many of their closest peers.

    Long AAPL.

    - Jasen.

    Yep, I was just mentally woking out how close to $1000 pre split that was as I read $140 ... pretty damn close! That 'unattainable', 'totally impossible $1000' seems quite reasonable now all of a sudden. Bernoulli has a lot to answer for!
  • Reply 10 of 51
    MacProMacPro Posts: 17,180member
    Getting the big guy down on one knee is the first major hurdle.  It's interesting to me that Apple differs in that it's rise has meant the collapse of so many formerly market-leading competitors.  I don't know of another business that has been responsible for so much disruption of competition in multiple spheres.  Microsoft's rise certainly spelled the end for a few competitors in the CPM market, and some software businesses along the way, but nothing of the magnitude of Apple coming into the smartphone business and, over a period of years, decimating the businesses of Nokia and Blackberry (two of, if not the, leading companies in that realm), or the magnitude of the shift in the PC market with the rise of the iPad, defining the post-PC era, or the wholesale restructuring of the music business in the era of the iPod.  Getting this company to its knees will be some feat of competitive prowess.

    You are right. When you stop and think, it's no wonder there are a few Apple haters out there! Apple is like a modern day Genghis Khan riding across the silicon plains.
  • Reply 11 of 51
    MacProMacPro Posts: 17,180member
    Brian White is going to have to outdo Icahn's call for $200/share.  Then we'll know the battle has truly been joined.

    Here is a promise, at $200 I tell the wife she can retire. :D
  • Reply 12 of 51
    slurpyslurpy Posts: 4,984member
    Quote:

    Originally Posted by lkrupp View Post

     

    Yes, we AI fanboys want Apple to thrive forever but it is, after all, a business. Think of every well known, iconic, successful tech business and they all had their day in the sun, stumbled, recovered, stumbled again, and so forth (Microsoft, HP, Dell, Sony, Blackberry, Nokia, IBM). Apple has an unparalleled management team at this time, is firing on all cylinders, can do almost no wrong, and has a loyal customer base that other CEOs would sell their grandmothers into slavery to have. I hope it continues for a long time but nothing is forever. The long knives are always out, waiting for the stumble and the opportunity to attack the big guy when he’s down on one knee. 


     

    The long knives have been out against Apple since its existence, and have only gotten longer, sharper, and more venemous with time. However, as long as Apple keeps doing what it's doing, which is create the best products in the world, it can very well break many of these "laws" that some seem to think are set in stone, which is that successful companies cannot stay successful for very long periods of time. I have yet to see a real threat, in terms of a company producing products of such quality and care, along with the software and ecosystem to support them, and with the right cultural thos. Noone even comes close.  As for the stock, yes I expect it to keep bouncing around. But there's no reason Apple needs to "fall". People have been predicting this since Steve Jobs return, and it hasn't happened. 

  • Reply 13 of 51
    I think the apple watch will win Apple back some cool points which the original iPhones had before they were copied. The coolness factor will translate into higher margins until Apple's competitors can catch up.
  • Reply 14 of 51
    boredumbboredumb Posts: 1,405member

    Glad they are so sanguine about various services -

    I've just discovered I can finally use my Visa Barclaycard in ?Pay...

    Couldn't when I got the phone in October.

  • Reply 15 of 51
    Here is a promise, at $200 I tell the wife she can retire. :D

    At about $150 I retire. ????
  • Reply 16 of 51
    flaneurflaneur Posts: 4,454member
    slurpy wrote: »
    The long knives have been out against Apple since its existence, and have only gotten longer, sharper, and more venemous with time. However, as long as Apple keeps doing what it's doing, which is create the best products in the world, it can very well break many of these "laws" that some seem to think are set in stone, which is that successful companies cannot stay successful for very long periods of time. I have yet to see a real threat, in terms of a company producing products of such quality and care, along with the software and ecosystem to support them, and with the right cultural thos. Noone even comes close.  As for the stock, yes I expect it to keep bouncing around. But there's no reason Apple needs to "fall". People have been predicting this since Steve Jobs return, and it hasn't happened. 

    Yep, because Apple is in a new business in human history, amplified consciousness. Other computer companies are in the same business, but they don't really know that, or don't appreciate it.

    Apple does know it, always has, and they show it by caring about user experience. Something to do with the mental equipment and experiences of the founder and the crews he assembled around him . . .

    Anyway, the company is alone at the vanguard of this revolution in business, and it shows that by controlling its hardware design, software and services, soon maybe more and more of its manufacturing. This sort of spherical organization resembles the old AT&T, which was the mother of all networks (Ma Bell!) until the breakup. If Apple is careful not to restrain progress the way AT&T was perceived to do in the 70s, it should be safe from competition from the big tech companies, none of which are led by people who "travel to India," as it were, for enlightenment. There are plenty of small developers who get what Apple's about, of course, and some get acquired for that reason.
  • Reply 17 of 51
    mj webmj web Posts: 918member
    As an AAPL buy and hold investor since 2007 I think the company is poised to hold its gains and climb to 150ish in 2015. It won't be straight up! The stock is probably a little ahead of itself now, will encounter downward resistance, and experience incremental pullbacks and reversals. The pipeline feels as solid as it did during the march from 600-700 but is more diversified today. Tim Cook has rectified most of the vulnerabilities I once criticized him for and I am now one of his biggest evangelists. His hires prove he doesn't have to be the smartest guy/gal in the room although he probably is.
  • Reply 18 of 51
    mj web wrote: »
    As an AAPL buy and hold investor since 2007 I think the company is poised to hold its gains and climb to 150ish in 2015. It won't be straight up! The stock is probably a little ahead of itself now, will encounter downward resistance, and experience incremental pullbacks and reversals. The pipeline feels as solid as it did during the march from 600-700 but is more diversified today. Tim Cook has rectified most of the vulnerabilities I once criticized him for and I am now one of his biggest evangelists. His hires prove he doesn't have to be the smartest guy/gal in the room although he probably is.

    OK, speculation time...

    Who will be the next president and what will their business experience (or lack thereof) do for the economic fortunes of the U.S.?
  • Reply 19 of 51
    sog35 wrote: »
    Don't forget the PE of 18 for Apple is based on last fiscal years profits. I'm expecting Apple to grow earnings 20-25% next year.

    So with a 18 PE next year this is safely in the $140-$150 range

    That would be lovely.
  • Reply 20 of 51
    rogifanrogifan Posts: 10,669member
    Upselling people to 64GB by removing the 32GB option is another way to increase margins, no? ;)

    Ben Bajarin says the puck is moving towards services. In a way I think this benefits Apple as I think they're less likely to be disrupted by services than commodity hardware OEMs. For example HP is now selling a $200 Windows laptop to compete with Chromebooks. But what if Microsoft decides to throw in a cheap laptop with a 2-year subscription to Office 365? Then you get OEMs like Dell and HP fighting over who gets to supply that cheap laptop? While Apple keeps focusing on quality and premium and not getting into a race to the bottom.

    That's why I hope with ?Watch Apple puts a heavy focus on the design, quality and materials. It's one thing that will definitely set it apart from the rest of the field. And I am curious, since none of the ?Watch photos mention where it was manufactured/assembled, is it possible that components will be made outside of China and perhaps only final assembly will be there? Based on the ?Watch site on apple.com, it appears that most of the materials and machines used to make the watch bands come from Europe (Italy, France, Netherlands). Perhaps another selling feature of the watch (or a reason Apple can charge a bigger premium) is the bands and/or other components are assembled someplace other than China?
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