Credit Suisse Initiates Apple Coverage

August 10th, 2008 at 3:00 PM - News by John Martellaro

On Friday, Credit Suisse announced that they are initiating coverage of Apple with an Outperform rating and a target price in 12 months of US$200.00. Appleis changing iPhone business model is seen as a positive move for profitability.

Credit Suisse cited key factors that have allowed Apple to defy macro economic conditions. The announcement said that Credit Suisse expects Apple to grow at a multiple of the overall market for man years to come.

The investment firm noted that Apple has reduced the cost for switchers, the Intel architecture has leveled the playing field, and Apple has successfully implemented a retail strategy. The prospects of the new business model for activating the iPhone will be more profitable for Apple in the long run.

That change was labelled a reversal of course, and some mobile phone executives had predicted that Apple would have to make that change. The abandonment of revenue sharing has also made it possible for Apple to engage over 70 carriers around the world.

"And finally, Appleis move towards a traditional contract-based subsidy model has enabled it to shift the economic burden of unlocked phones to the carriers. [Emphasis by TMO.] In the previous model, an unlocked phone meant that Apple was not going to share in the highly profitable monthly carrier revenues. Now, a carrier may choose to sell a phone without a contract, but Apple still gets the same wholesale price for the phone (with the subsidy baked in). We believe this provides a higher degree of certainty to Appleis earnings and cash-flow stream," Credit Suisse said.

Credit Suisse expects to see US$6.66 earnings per share in 2009.