Analyst Raises AAPL Price Target to $300; iPhone OS 4 Should Compel More iPhone Sales

| Apple Stock Watch

Apple’s new iPhone OS is compelling, and it should spur new sales of iPhones and iPod touches once it ships, according to Barclays Capital analyst Ben Reitzes. Based on higher-than-expected sales of iPhones during the March quarter and higher estimates in the coming quarter, Mr. Reitzes raised estimates for Apple through fiscal 2011, and raised his price target to $300 for the stock.

For fiscal 2010, Mr. Reitzes is estimating earnings per share (EPS) of $12.30, up from $12.00, with revenue of $57.7 billion, up from $56 billion. For 2011 he raised EPS estimates to $14.40 up from $13.75, on revenue of $67.4 billion, up from $64.5 billion.

iPhones and iPads are the driving force behind the estimate increases, and Mr. Reitzes said that his estimate of 1.2 million iPads during the June quarter may well prove conservative. Apple sold 450,000 of the devices in less than a week.

iPhone OS 4 is going to boost sales of iPhones, according to the analyst. He wrote, “We believe software is Apple’s ‘Secret Sauce’ that competitors simply cannot match. Apple’s pace of innovation and quality of product have left everyone else far behind, in our view, and point toward further share gains for the company.”

He added, “While many of [the new features in iPhone OS 4] are significant upgrades that will likely get users excited for the next generation iPhone, some of the features will not be available to older 3G & 2G iPhones and the 2nd generation iPod Touch and earlier models, which could fuel even more demand for upgrades.”

Mr. Reitzes raised his price target on the stock from $280 per share to $300 per share, noting, “We continue to believe that Apple deserves a higher multiple relative to both the group and the market given it is one of the best growth stories in IT hardware over the long term.”

AAPL closed Friday in the black, at $241.79 per share, a gain of $1.84 (+0.77%), on light volume of 11.9 million shares trading hands.

*In the interest of full disclosure, the author holds a small share in AAPL stock that was not an influence in the creation of this article.  

Comments

Bosco (Brad Hutchings)

Adobe platform evangelist: “Go screw yourself, Apple.”

Funny, if you read his whole post, you’d think your humble Bosco was his ghost writer. Especially the part about not buying anything from Apple until the current leadership goes away. You AAPL shareholders should sell now. The war is on, and it’s gonna get ugly.

Tiger

Sell, when predictions are that stock will climb to $300 before the end of the year once iPad 3G, Video Chat enabled iPhones, and new MBPs come out?

Why sell now?

Bryan Chaffin

Bosco, I am pretty comfy with the idea that Apple is going to come out in the driver’s seat on this so-called “war.”

By the by, we should come up with the stakes for our bet! How about if you win, I have to write something about the dark side of Apple’s Whole Widget approach? If I win, you have to write something about the good side of the model.

Bosco (Brad Hutchings)

Yeah, that’s fair. My concession essay will focus on how the whole widget approach opens up interesting new distribution opportunities like Cydia, as no entity can actually control that big of an ecosystem grin.

Speaking of Apple exercising total control, I’m sure you saw this today... They’re protecting you from a non-unified user experience. Damned good thing! People out there could get hurt by this stuff!!

Bryan Chaffin

Oh come on, Bosco, that’s hardly a concession! I’d accept that as a caveat to a concession, but it’s kind of like saying that someone’s sister is kind of pretty despite having such an ugly face (or something). smile

There is an up side to Apple’s control. One is free to not want the tradeoffs involved, but the up side still exists.

Just as the downside exists.

Bosco (Brad Hutchings)

Well, we are still 51 weeks or 2.65 million units away from settling the bet grin. Adobe will be shipping their Flash—> iPhone compiler. Officially, it will be an “enterprise” play. Perhaps in the future, it will support more than the 100 registered devices so graciously allowed by Apple’s developer agreement. Cydia will use this to establish the second largest app catalog in mobile phone space, and the largest in tablet space. Few of its developers will actually be bound by the Apple Developer Agreement. Jailbroken iPhones will comprise 30% of the user base, and you’ll write articles on TMO about apps on Cydia as if they are just as legit as apps blessed by Apple.

The only thing that will make this play out any richer is if Apple sues Adobe. Tiger, that’s why Ballmer is keeping quiet. There will be tremendous opportunity for Microsoft when Apple goes nuclear on Adobe.

Boris Gates

YOu guys are all nuts.  “Jailbroken iPhones will comprise 30% of the user base” - yeah right.  By far and away most consumers want a good uncomplicated user experience.  Jailbreaking is for nerds, a very small minority of users.

I say go Apple, make the user experience good, predictable, and maximize battery life.  Let MS and Android get their mobile OS’s annoy the heck out of users ‘cause it is way too hard to keep track what is open, what is chewing up cpu cycles and battery life, and for that matter which apps are reporting home the location info.
See the Appleinsider article on the Adobe thing, it appears that the restrictions are purely for resource management. For Apple’s multitasking to work, the apps have to follow certain programming conventions and be of predictable structures, the cross compiler will apparently not deliver on that front.
I say GO Apple, keep things running smoothly!

Bryan Chaffin

Bosco, all of that may well become true (it won’t), but making your thoughts hardly some sort of penance for losing a bet!  It would make a great editorial, though.

We could move our bet outside this realm, say to the world of music (who was better, NSync or The Backstreet Boys?), or maybe admitting how many hours you’ve spent in your life watching Three’s Company?

I’d agree to that sort of thing.

We should have solidified the stakes before release date. smile

But 30% of the user base using jailbroken iPhones? That’s pure delusion.

I will iterate my earlier position that the thing that keeps you from understanding Apple’s success is that many people like devices that work without the need of constant tinkering and fixing.

Maybe we can have a separate bet on that?

Neil Anderson

Eighty-five million iPhone and iPod touch users ... soon to be 100 million and iPad users are just beginning to join the party.

Bosco (Brad Hutchings)

Bryan, I will happily honor the bet and the payoff you described above, and in a positive spirit. But I’ll also trash talk in the meantime. Give me my five weeks please. Heh.

The thing about Apple’s behavior lately, and the thing that I noticed as my mind changed from cautious and confused to totally non-plussed by any crap they pull, is that everyone has their breaking point. I saw you laying what may be your potential breaking point out in a column about iPad apps the other day. Today, I am watching a friend who is strongly affected by this Flash language go from a happy Apple supporter who bought his daughter an iPad on day 1 to someone who seems resigned to getting kicked in the nuts by this today. I wonder what his tolerance will ultimately be.

Jailbreaking is a bit nerdy right now. On the demand side though, not so nerdy. College kids all have a friend who can do it and show them the ropes. Over the next year, it will become a significant marketplace that Apple will not be able to control. Or force feed ads to.

@Boris… One of the benefits of having graduated from a Top 10 computer science school Phi Beta Kappa and cum laude, then getting my MS there is that I have a pretty refined bullshit detector about claims like the ones Apple Insider offers. That is total bullshit. When Flash sourced apps become plentiful enough and iPhone OS 4 is out, and they run on those phones (jailbroken or not), we can easily evaluate that claim. And I would be more than happy to do the benchmarks and write the article and let all of you repeat the experiment and wallow in the facts. I’m sure the Apple Insider stuff is an appealing story for the Apple fan who wants to think they are supporting something noble and righteous, but that doesn’t make it true.

Info Dave

Boris Gates said: By far and away most consumers want a good uncomplicated user experience.  Jailbreaking is for nerds, a very small minority of users.

This is the most intelligent response I read from a member of the Gates family in decades. No offense, Boris.

The pissing contest between Apple and Adobe is inconsequential to “the rest of us”. Particularly since many websites are providing alternatives to Flash. Flash has a place, but it has never been video playback. Flash has been a crutch. HTML5 is the future.

Mobile can’t do Flash well. Flash is too resource intensive. Windows Phone 7 will not support Flash. Where Flash is supported, battery life sucks. Video playback is sporadic, jumpy, and sometimes, unwatchable. You don’t want Flash on your mobile device.

Boris Gates

Professor Bosco, who cares about your credentials, we are talking opinion. 
You know my Hunday has a microprocessor in it, and the manufacturer decided that it will not run Adobe Flash, as best as I can tell anyway, maybe it does and I overlooked it.  Anyway, I am ok with that, just like with the iPad.  Apple decided they don’t want that Flash junk on their product, fine. 
And, I still think there are technical issues that make Flash undesirable, but since I didn’t finish college, that opinion is of course worthless. :(
You privileged-a$$ college snobs think you know things.  I would suggest that Steve Jobs, also not a college grad?, knows a thing or 2 about making stuff successful.  Perhaps he has the most impressive track record in history, and maybe not quite.
On this issue of Flash, Mr. Jobs probably should have checked with you first, Mr. Cum laude….

Bosco (Brad Hutchings)

Oh ferchrissakes Boris. Re-read my post. I only mentioned the education and expertise so I could offer an informed opinion on a bullshit fanboy lie. I don’t know what you do for a living. Let’s say you are an expert flooring installer. Let’s pretend that a wives’ tale emerges about dabbing corn oil on the plank joints so that they don’t expand with heat or moisture. You know it’s bullshit because you have real knowledge about those kinds of things through your training and work experience. So you share it and the fanboys call you an elitist with your ITT Tech major in floor installation.

If you want to hold an opinion based on a “fact” that is so obviously incorrect to anyone with real knowledge of the technology at hand… well, you might be an iPad user. Apologies to Jeff Foxworthy.

Here’s a link that might obliquely give you another view of things… Steve Jobs’ email account doesn’t seem to have as big of a problem with Flash apps deployed in the enterprise outside the App Store. Do you think Apple doesn’t care about multi-tasking resource management for enterprise customers? Seriously?!?

doogie

I haven’t read the Apple Insider articles, but I can imagine based on what I’ve seen in the past.

I think it all amounts to differentiating themselves from the broader market?”Think different” and all that.  Apple charges premium prices based on their differentiation rather than competing in commodity markets.  A lot of what makes the iPhone OS family special is the software.

Generic, cross platform software waters down the brand by reducing differentiation and is therefore not desirable (in principle, anyway).

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