Thursday, September 17, 2009

Analysts Set High Bar for AAPL

Financial analysts are betting that Apple stock will soon surpass the heights it held in late 2007, targeting as much as $235 per share within the next year. What makes them so optimistic? Apple looks poised to ride the crest of an economic upswing with the strength of its App Store, its activity in China and the possibility of opening the iPhone to new carriers.
It's a good time to be holding Apple (Nasdaq: AAPL) stock -- analysts are more bullish than ever on the company.
The most eye-catching statement came on Tuesday from Needham's Charlie Wolf, who predicted that Apple will trade at US$235 in the next year.
Meanwhile, iSuppli says Apple will remain partners with wireless carrier AT&T (NYSE: T) , which is frantically upgrading its networks. If true, that will make for more stability, which is always good for investors.
Finally, Apple's incursion into the video gaming field with its new iPods, launched Sept. 9, may pay off as game sales begin to pick up.
Analysts Charge Ahead
Not too long ago, the more bullish analysts were pegging Apple's stock price at $200. Needham's Wolf has raised the bar further, jacking up his price target on Apple by 18 percent, from $200 to $235.
This will be driven by the iPhone, specifically by the explosive growth of the App Store, which will drive iPhone sales, Wolf said.
Granted, other smartphone vendors and wireless carriers are launching or have launched their own app stores, but the iTunes App Store is the undisputed king in this field. It has more than 75,000 applications, according to Apple's statement at its media event in San Francisco on Sept. 9.
On Monday, Piper Jaffray announced that it is maintaining an overweight rating on Apple. Overall, it sees Apple's results for this quarter being in line with the Wall Street consensus.
JMP Securities last week upgraded Apple from Market Perform to Outperform, although its target for Cupertino's stock prices was a more conservative $200. It sees the China Unicom deal for the iPhone and the new iPod lineup announced Sept. 9 as the main drivers.
At Tuesday's close, Apple shares were trading at $175.16.
The Apple-AT&T Pas de Deux
Speculation has been rife that Apple might add another wireless carrier or two in the United States as iPhone partners.
However, Cupertino has consistently denied that it will move away from AT&T, and a report that iSuppli released Sept. 10 appears to support its statements. The report's author, iSuppli principal analyst Francis Sideco, dismissed rumors that Apple will switch from AT&T to Verizon in 2010.
"The main reason Apple is likely to stick with AT&T beyond 2010 is the relatively wide usage and growth expected for the HSPA air standard used by AT&T for 3G data," Sideco said. He expects HSPA to have a total of 1.4 billion subscribers worldwide by 2012, compared to 304.6 million for Verizon's EVDO standard by 2013.
HSPA is high-speed packet access, a technology that extends and improves the performance of WCDMA protocols. EVDO stands for Evolution-Data Optimized or Evolution-Data Only. Part of the CDMA2000 family of standards, it has been adopted by many wireless carriers worldwide.
AT&T spokesperson Mark Siegel told MacNewsWorld that the carrier is deploying HSPA 7.2 technology later this year in six cities and will roll out the technology to other cities next year. AT&T is spending up to $18 billion this year to improve its wireless and wireline broadband networks, he said.
However, Julien Blin, principal analyst and CEO of JBB Research, thinks iSuppli is barking up the wrong tree. "Who cares if HSPA will outstrip EVDO?" he asked. "Both Verizon and AT&T are moving towards LTE (Long Term Evolution)."
LTE is the last step toward 4G wireless, which will increase the speed and capacity of mobile telephone networks. To sum up its advantages, it will improve the end-user experience, minimize dropped calls, and let carriers offer mobile broadband services.
Verizon and AT&T will conduct LTE trials in 2010, Blin told MacNewsWorld.
"We will begin testing 4G technology next year, and will begin deployment in 2011," AT&T's Siegel said.
iPods Got Game?
At Apple's Sept. 9 media event, the company unveiled new iPods targeted at video gamers. Phil Schiller, the company's vice president of worldwide product marketing, said iTunes has 21, 178 gaming titles, compared to 607 on Sony's (NYSE: SNE) PlayStation Portable and 3,680 on the Nintendo DS platform.
With this push into gaming, Cupertino may be preparing for the future. According to the NPD Group, video game sales continued to fall in August for the sixth straight month, but the decline was less than in previous months.
Meanwhile, game hardware sales increased, except for the Sony PlayStation 2 . The PlayStation 3 saw unit sales shoot up 72 percent over July's levels, and NPD analyst Anita Frazier attributed this to Sony's price cuts, which took effect in the final days of that month.
"Madden NFL 10," the top-selling game, sold nearly 1.9 million units -- and its publisher, Electronic Arts (Nasdaq: ERTS) , took the stage on Sept. 9 to show off a version of the game for the iPod touch and iPhone.
Sales of iPods, Needham's Wolf predicts, will fall as the music player industry continues to shrink, but the iPod will continue to dominate the market. "The iPod will maintain a 60 percent share of the worldwide market," he said. Also, if video game players begin using the iPod, that might provide a whole new area of growth.

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