Needham Raises Apple Target to $540 on Strong iPad Sales

| Apple Stock Watch

Apple’s iPad will continue to dominate the tablet market, according to Needham & Company analyst Charlie Wolf, so he raised his 12-month target price from the company’s stock from US$450 up to $540. He also sees the iPad as Apple’s true “halo effect” device, driving up the value of the Mac and iTunes, as well, according to Barrons.

The iPad now makes up 12 percent of Apple’s share value, up from 9.6 percent. iTunes and the App Store account for 5 percent, up from 3.4 percent, and the Mac now accounts for almost 12 percent of the company’s stock value. The ever popular iPhone holds about half of Apple’s stock value.

iPad brings in the cash for AppleiPad brings in the cash for Apple

So far, Apple’s competitors haven’t been able to produce a tablet that can compete with the iPad. “All of them have been greeted with a yawn and lackluster sales,” Mr. Wolf said. “None have been able to undercut the aggressively priced iPad, because the iPad’s component costs are materially lower than those of competing tablets.”

The iPad also has the popular App Store with over 100,000 applications. In comparison, “applications available on the tablets introduced this year number at best in the hundreds,” he said.

iPad competitors also have to deal with Apple retail stores. The company has over 300 stores with more on the way, and plenty of customers rushing in to buy Apple products. Mr. Wolf doesn’t see Apple’s competitors being able to compete with traditional consumer electronics chains for distribution — yet another blow to iPad competition growth.

With the iPad’s price and wealth of applications, along with Apple’s own retail chain, the competition doesn’t stand much of a chance for now. Thanks to Apple’s winning combination, it should land a “materially larger share of the tablet market than we previously forecast,” Mr. Wolf said.

Mr. Wolf is maintaining his “Buy” rating for Apple’s stock while raising the target price from $450 up to $540. Apple is currently trading at $374.02, down 3.35 (-0.89%).

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Comments

mhikl

Some times its a yawn to mention the strengths of the iPad but like a mantra, they need to be repeated for the sake of those intimidated by the Droid distracter.

- almost a decade in the planning and testing (not a last minute slap together effort)
- sold on time as announced, in working order
- immediately successful & recognisable under the success of the iPod
- a developed ecosystem in place (unmatched by any competitor)
- an evolving organic integration that time will make difficult to replicate
- price, profits and stores that provides high profits to Apple & impossible for the competition to achieve
- an OS that is efficient and fine tuned and dedicated to its ecosystem
- a multipurpose that spans the distance between child and business

In working order is the first hurdle the competition has to overcome. From there, they can start addressing the points that follow. The failure track indicates it will be very difficult to impossible for the envious to replicate the iPad?s success.

I?m sure I have missed other advantages but the general ones provided show how difficult this race has become, especially when no contenders have even approached the gate with anything that actually works as advertised.

In the end, profit is the law of success. How does anyone catchup to Apple when it already has in place the trails that maximise profit!

ibuck

I don’t know if Wolf’s right, but I hope AAPL achieves a new floor above $400 once the current market wackiness dissipates.

The economy and consumer confidence probably need to improve dramatically for AAPL to approach $500.

mhikl

iBuck, I suspect that it is the share price that holds new investors back. If you look how Google is doing it seems to be much the same dance in the stock market as Apple, though over time, Apple seems to do better. I do not know if a severe stock split would make any sense, though, but a number of my friends say they would buy if the stock price wasn’t so high. There are large players in Apple stock and they shift and buy with the wind to maximize shorter term profits.

Looking over Apple?s history, the growth over each year is pretty amazing. As a short term investment it is a gamble. Over the long spread, success seems to be its nature.

I think we are in for troubled times. However, if history is to offer any lesson, Apple did amazingly well over previous the troubled market. It has a proven record when it comes to longer term planning and product development than most and I am not just looking at the previous few years.

Lee Dronick

I suspect that it is the share price that holds new investors back.

I wonder if the high price also keeps overly emotional investors out of AAPL. I am just speculating, when it comes to figuring out stock market investors I am off soundings.

mhikl

I, too, just speculate, Sir Henry. I do a bit of reading so have a lot of scrambled ideas but numbers are not my forte. However, I know enough that owning one share at $400 is the same as owning ten share of the same stock at $40, split wise.

I read on some site that those who desire the stock are already in it. However, the split thing might encourage the emotional investor.

Lee Dronick

I am thinking that an overly emotional investor is the Chicken Little type who panics and sells at the slightest dip in price. This in turn would drive the stock down further. I am basing this on some people I know who wanted to sell their stock (not AAPL) when it plunged way down. I was saying to them that you lost already your wad so just ride the storm out and see if it will eventually be unicorns and rainbows again. Remember two years ago when AAPL was down to $160?

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