JP Morgan: iPhone, iPad to push Apple stock to $390 by Dec. 2011
"Buckle up," was the advice issued Thursday to Apple investors by J.P. Morgan, as the firm expects Apple's stock to soar to new heights in the next year and a half based on rapid growth of both the iPhone and iPad.
Apple was added to J.P. Morgan's Analyst Focus List, and increased the price target for the "overweight" stock to $390 by December of 2011. Analyst Mark Moskowitz said it is the growth of the iPhone and iPad, combined with untapped international opportunities for the Mac, that will send Apple's stock soaring to new heights.
"We do not expect our latest round of upward revisions to be the last," he wrote. "Overall, our estimate revisions point to top and bottom-line growth far exceeding 20% over the next two years, which we think requires a re-rating of the stock's valuation principles."
For starters, Moskowitz believes the iPhone 4 will finally push Apple past the 10-million-per-quarter threshold. He believes Apple will eclipse that number in shipments for the iPhone in September 2010. Previously, it was expected to reach that milestone in March 2011.
For comparison, last quarter Apple sold 8.75 million iPhones, representing its best quarter ever for handset sales.
The numbers don't even include the prospect of a Verizon-compatible CDMA iPhone, rumors of which have picked up again this week, following a new report from Bloomberg claiming the device will arrive in January 2011. Moskowitz said conversations with industry contacts have indicated that a Verizon iPhone could launch next year at the earliest, but J.P. Morgan has opted to take a "conservative view."
"For Verizon, we think the issue is still over the subsidy," he said. "If that is not the issue, it could be that Verizon wants to build out its 4G LTE network, which is still in the early stages. On this topic, we do not expect the major 28 cities in the U.S. to have full LTE capability with Verizon until mid-2011."
And iPad sales are "just getting started," the analyst believes, with "iPad mania" set to intensify during the back-to-school and holiday seasons. Previously, the firm did not expect the iPad to catch on with consumers until future models added more features. J.P. Morgan now believes Apple will sell 3.8 million iPads in the June quarter, and 21.5 million in Apple's 2011 fiscal year.
"We expect the iPad to be a top selling item in both the back-to-school and holiday seasons," he said. ""There will be competitive entries introduced in coming quarters, but we do not expect there to be much disruption. Similar to the iPhone, the iPad reflects Apple's ability to introduce unrivaled technology experiences for the consumer."
Finally, Moskowitz said that the Mac could have some "near-term bumps," with hype over the iPad having some impact on sales. J.P. Morgan has lowered its forecast for Mac sales in the current quarter to 3.05 million, down from 3.11 million. For fiscal 2011, totals were also lowered from 15.95 million to 15.59 million.
But the analyst said Apple still has great potential to grow the Mac overseas. Moskowitz said he believes in a matter of years, Apple should be able to increase its international market penetration. Even if Apple reaches a global market share just half of what it has in the U.S., the revenue opportunity is in the billions of dollars.
Apple was added to J.P. Morgan's Analyst Focus List, and increased the price target for the "overweight" stock to $390 by December of 2011. Analyst Mark Moskowitz said it is the growth of the iPhone and iPad, combined with untapped international opportunities for the Mac, that will send Apple's stock soaring to new heights.
"We do not expect our latest round of upward revisions to be the last," he wrote. "Overall, our estimate revisions point to top and bottom-line growth far exceeding 20% over the next two years, which we think requires a re-rating of the stock's valuation principles."
For starters, Moskowitz believes the iPhone 4 will finally push Apple past the 10-million-per-quarter threshold. He believes Apple will eclipse that number in shipments for the iPhone in September 2010. Previously, it was expected to reach that milestone in March 2011.
For comparison, last quarter Apple sold 8.75 million iPhones, representing its best quarter ever for handset sales.
The numbers don't even include the prospect of a Verizon-compatible CDMA iPhone, rumors of which have picked up again this week, following a new report from Bloomberg claiming the device will arrive in January 2011. Moskowitz said conversations with industry contacts have indicated that a Verizon iPhone could launch next year at the earliest, but J.P. Morgan has opted to take a "conservative view."
"For Verizon, we think the issue is still over the subsidy," he said. "If that is not the issue, it could be that Verizon wants to build out its 4G LTE network, which is still in the early stages. On this topic, we do not expect the major 28 cities in the U.S. to have full LTE capability with Verizon until mid-2011."
And iPad sales are "just getting started," the analyst believes, with "iPad mania" set to intensify during the back-to-school and holiday seasons. Previously, the firm did not expect the iPad to catch on with consumers until future models added more features. J.P. Morgan now believes Apple will sell 3.8 million iPads in the June quarter, and 21.5 million in Apple's 2011 fiscal year.
"We expect the iPad to be a top selling item in both the back-to-school and holiday seasons," he said. ""There will be competitive entries introduced in coming quarters, but we do not expect there to be much disruption. Similar to the iPhone, the iPad reflects Apple's ability to introduce unrivaled technology experiences for the consumer."
Finally, Moskowitz said that the Mac could have some "near-term bumps," with hype over the iPad having some impact on sales. J.P. Morgan has lowered its forecast for Mac sales in the current quarter to 3.05 million, down from 3.11 million. For fiscal 2011, totals were also lowered from 15.95 million to 15.59 million.
But the analyst said Apple still has great potential to grow the Mac overseas. Moskowitz said he believes in a matter of years, Apple should be able to increase its international market penetration. Even if Apple reaches a global market share just half of what it has in the U.S., the revenue opportunity is in the billions of dollars.
Comments
Seriously: let's see first how the issue with the reception plays out
With the leak that Apple had by Gizmodo, the on stage troubles at WWDC and finally the fiasco of the Antenna, Proximity Sensor and the plethora of bugs in iOS4, the Consumer will become the skeptic and will prevent the stock from reaching $390
I see your but take exception to the gizmodo leak. How does that instill skepticism within consumers? It created so much good promotion and buzz than negative for Apple. I dunno, I don't really see a connection with the price of stock and this particular leak. Let me clarify... this particular leak. And the WWDC troubles had nothing to do with the phones performance... it was a wifi overload issue. Most consumers will look right past that, as its not really something they are concerned with. Developers were the main audience for that presentation. I dunno.. Not sitting here being a troll, just curious how that all connects.
Seriously: let's see first how the issue with the reception plays out
Seriously, let's see how the economy plays out. In the current conditions, I don't see such a bullish case being made for any stock.
price up that high. I understand that the iPhone and ipad are growing revenue but stll it doesn't compute for me. Could some of that high price come from an expactation that in late 2011 early 2012 there maybe be fewer stronger performing companies?
I know some of you folks are pretty good at stock analasis could you tell me if I am off base.
*I forgot to add that while they are rolling out new stores internationally I find it highly unlikely that they will be opening enough new stores fast enough to make that big of increase revenues in that short of a time frame.
I don't mean to be sceptic but how is the current lineup of product going to drive the
price up that high. I understand that the iPhone and ipad are growing revenue but stll it doesn't compute for me. Could some of that high price come from an expactation that in late 2011 early 2012 there maybe be fewer stronger performing companies?
I know some of you folks are pretty good at stock analasis could you tell me if I am off base.
The formula they use for these projections is pretty straight-forward. They estimate earnings, which requires some best-guesses on sales and margins. Lots of available data makes this not so difficult. Then they estimate earnings multiples (P/E), which in large part is based on projected earnings growth rates (they say 20% or more, which is consistent with recent history). The projected stock price is the product of the two. The second number is the idea killer, though. In a market where optimism rules, multiples are going to be much higher throughout the market. If the market turns bear, multiples can be much lower. The P/E assumption here is the one to question, IMO.
Seriously, let's see how the economy plays out. In the current conditions, I don't see such a bullish case being made for any stock.
Considering how the stock's been dropping the last couple days, I think you are right in the short term.
Seriously, let's see how the economy plays out. In the current conditions, I don't see such a bullish case being made for any stock.
I concur.
I don't mean to be sceptic but how is the current lineup of product going to drive the
price up that high. I understand that the iPhone and ipad are growing revenue but stll it doesn't compute for me. Could some of that high price come from an expactation that in late 2011 early 2012 there maybe be fewer stronger performing companies?
I know some of you folks are pretty good at stock analasis could you tell me if I am off base.
*I forgot to add that while they are rolling out new stores internationally I find it highly unlikely that they will be opening enough new stores fast enough to make that big of increase revenues in that short of a time frame.
JP Morgan and the big brokers have been know for doing pump-n-dump scams. Put bluntly, that's the only role these stock institutes do now. Get the price up and get real people to invest real money then the big movers get out before the bubble bursts. Like the dot com era...
JP Morgan and the big brokers have been know for doing pump-n-dump scams.
Even if this was true (and it's a crime), nobody can "pump and dump" a stock like AAPL.
Seriously, let's see how the economy plays out. In the current conditions, I don't see such a bullish case being made for any stock.
Mmmm.. I remember someone telling me the same thing about the $200 barrier
With the leak that Apple had by Gizmodo, the on stage troubles at WWDC and finally the fiasco of the Antenna, Proximity Sensor and the plethora of bugs in iOS4, the Consumer will become the skeptic and will prevent the stock from reaching $390
Only in your Apple hating wet dream.
Best
Mmmm.. I remember someone telling me the same thing about the $200 barrier
Not sure what you are implying. AAPL first broke $200 in December 2007, IIRC. That was before the recession hit, as you may recall. The stock fell by 60% after that, and took nearly two years to get back to $200 due to the overwhelming pessimism of investors.
Not sure what you are implying. AAPL first broke $200 in December 2007, IIRC. That was before the recession hit, as you may recall. The stock fell by 60% after that, and took nearly two years to get back to $200 due to the overwhelming pessimism of investors.
I remember it well, Dr. Millmoss. My girlfriend was so impressed with all my Apple gear (iPhones, laptop, iMac, iPods, etc.) and knowledge of Apple, she bought 5 shares at $186 right before the recession only to watch it tank.
But know she is getting happy again!
Best
With the leak that Apple had by Gizmodo, the on stage troubles at WWDC and finally the fiasco of the Antenna, Proximity Sensor and the plethora of bugs in iOS4, the Consumer will become the skeptic and will prevent the stock from reaching $390
Say it with me: Apple is Doomed!
Not sure what you are implying. AAPL first broke $200 in December 2007, IIRC. That was before the recession hit, as you may recall. The stock fell by 60% after that, and took nearly two years to get back to $200 due to the overwhelming pessimism of investors.
Wow! 2 years to climb well over 100%! That _is_ overwhelming pessimism!?
[/sarcasm]
KRR
They sold 3m devices in the first 60 days, all at a price of at least $500 gross, in a category that did not even exist before, with estimated gross margin of about 50%. (isuppli cost estimate). In other words, $1.5 billion of new gross revenue, and $750 million of new gross margin! in 60 days! Are you kidding me! On an entirely new product segment! Show me another company that can do that.
They then proceeded to sell 1.7m iphone 4's in the first 3 days! Gross revenue at at least $400 per unit (including the ATT contribution) , gross margin also at least 50% (again using isuppli component cost). So in 3 days that is $0.7B gross revenue and $0.35B gross margin. Wow!
So, clearly the market is inefficient and stock price does not progress in a linear fashion (random walk, anyone?). Clearly a falling tide drops all boats...market doesn't look so good in general, all that is true. Today. But if you were looking for a home for your equity investment, who are you going to bet on? When you can get nearly zero on cash, and no more than 5% on BB+ corporate bonds?
Back up the truck!