Apple: Keep in Mind the ‘Heart Transplant,’ Says Piper
Piper Jaffray's Gene Munster this morning reiterates an Overweight rating on shares of Apple ( AAPL ) and a $910 price target, offering his view on “ten key points” he thinks are important to consider on the way to a $1,000 share price “in the next couple years.” The most important things are further innovation, he believes, coming in this year’s product lineup, including the “ iPhone 5 ” and an Apple-branded TV . Also, subsidies for iPhones won’t change much, he thinks, and the company has more growth coming in China, and will probably hold onto a 40% gross margin or better. Of the iPhone 5, Munster offers up some prognostications which sound fairly much like speculation that has floated for the last several months: will represent the biggest consumer electronics product launch of 2012 as well as the biggest device upgrade cycle in smartphone history. While there has been a widely reported shortage of 28nm chips that would provide the cellular modem for the new iPhone, we are confident that Apple will be able to procure a lion's share of the chips going into the production of the new iPhone. We continue to believe there is an 80% chance that Apple can make our 49 million iPhone 5 unit estimate without supply difficulty in the December quarter. In terms of the phone itself, we believe the iPhone 5 will have a completely redesigned body style, which may more closely resemble the metallic rear panel of the current iPad. We believe there is a 60% chance the new phone has a slightly larger 4+" screen. We believe larger screen size is one of the few areas in which Android devices have been able to compete. The next iOS beta SDK could shed light on the potential screen size. Beyond the redesigned body and screen, we believe the new phone will include 4G LTE, upgraded processor and memory, and a higher megapixel camera. As for subsidies, they're not going away because there will always be some carrier in a market who wants to use them to improve from second or third place, and because "consumers want the iPhone […] driving lower customer acquisition costs around the phone for carriers." Also, he notes, Apple "does not get paid a bounty for new subscribers. We believe ( AMZN ) & Best Buy ( BBY ) get paid between $25 and $75 for new subscribers, with between 5-10% of subscribers coming from this channel." The rest of the key points incude:
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