I don't normally talk about analysts comments in stand alone posts because most of the analyst community seems to be engaged in group think, but even before the market surged at 10 AM up on better than expected consumer sentiment, NASDAQ was green. Really they should just rename NASDAQ Research in Apple's Google ; these guys dominate.
I don't see anything ground breaking or new in the Apple (AAPL) analysis (basically what I wrote about this weekend in my South Korea piece), but we've been in a stage for nearly 3 months now where all news is good news. Looking at Apple's chart it was actually weakening (broke down below 20 day moving average for 2nd time in as many weeks) and starting to get worrisome but 'thankfully' our analyst came to the rescue. Now it will be interesting what it does when it gets to highs reached a few weeks ago. For this market to continue ever upward; the generals will be needed.
Research in Motion (RIMM) is up in kind, and Palm (PALM) continues its rocket-like ascent [May 19: Palm to Launch Pre June 6th at Apple iPhone Pricing: $200]... I continue to love the smart phone market as they take share from normal phones... and hopefully by 2014 or so we can be like South Korea. [NYT: In South Korea, all Life is Mobile]
- Shares of Apple Inc. soared on Tuesday after an analyst upgraded the stock on her belief that the iPhone's growth potential has been underestimated. We believe Apple is emerging as the clear leader in the battle over the mobile Internet, said Morgan Stanley analyst Kathryn Huberty, in a research note. Smartphones are taking increasing share from traditional handsets and Apple's iPhone currently leads market share of the mobile Internet, she said.
- She sees mobile Internet, where people use their cell phones to go online, as the next biggest market opportunity in the technology sector. (this is new?)
- The iPhone currently has a 38 percent share of the mobile Internet market, up from 5 percent a year ago.
- The biggest drawback to the iPhone has been the cost of the phone and plan of service. So Huberty sees coming price cuts to the current model of the iPhone driving demand by 50 to 100 percent, depending on the size of the discount. Moreover, 15 percent or more of current iPhone users upgrade to a newer version. She expects Apple to cut the current generation iPhone's price to $99 to $149, from $199, at the minimum. (that would be interesting, especially on the lower end since Apple is selling itself as a premium franchise for a premium price)
- Huberty said Morgan Stanley's annual Apple survey of 2,500 consumers showed that among people who were not extremely interested in buying an iPhone, demand would rise by 58 percent if the phone drops in price to $150 and up 124 percent if the phone costs $100. Moreover, 35 percent said they're more likely to buy an iPhone if it has a lower-cost plan.
- As such, Huberty upgraded Apple to overweight or buy from equal-weight, or hold. She also raised her 2009 earnings forecast to $5.48 per share from $5.23, to $7.03 from $5.38 for next year and to $8.83 from $5.85 in 2011. The analyst's new estimates are far higher than the average estimate of analysts for 2010 and 2011, which are $6.19 and $6.51, respectively. Huberty raised her target price to $180 from $105 for the next 12 to 18 months.
- Huberty now expects Apple to sell 42 percent more iPhones in 2009, to 24.8 million units, and 61 percent more to 36.2 million in 2010. (recession reschemession?)
- Huberty does see some risks to her bullish call on Apple, however, including a smaller-than-anticipated price cut on the iPhone that could mute demand and weaker Mac and iPod sales than expected.
Changing Behavior by iPhone Users graphic via Fortune