UBS Bumps AAPL Price Target on iPhone 5, Praises iPad Launch

| Apple Stock Watch

UBS analyst Maynard Um issued two research notes on Apple Inc. on Friday. In the first, he bumped Apple’s price target from US$550 to $675, saying that he expected the launch of a new iPhone later this year to be the biggest launch in Apple’s history. In the second note, he deemed the launch of Apple’s new iPad a success and offered the results of a survey among those waiting in line to buy the new device.

“We expect Apple to launch its redesigned iPhone 5 in October & expect the company to accelerate the number of initial carriers it sells into to drive its biggest launch ever,” the analyst wrote when raising his price target. “Although supply chain constraints are difficult to assess at this point, we expect Apple to be prepared for a big launch. While the iPad 3 reception & dividend are important, we believe the iPhone 5 will trump both as a catalyst.”

Apple hasn’t yet announced the iPhone 5, but the company is widely expected to refresh its smartphone line later this year.

The analyst also noted that Verizon is planning a change in its billing practices to an account-based billing. This will allow users to spread their data plans among multiple devices, and Mr. Um believes this will, “help [Apple’s product mix] shift more toward higher priced/margin LTE- enabled iPads.”

Due to both of these factors, he raised his estimates for fiscal 2013 from revenue of $175.8 billion to revenue of $180.1 billion. He raised his earnings per share (EPS) estimate fro $48.83 to $50.43. Fiscal 2012 estimates were unchanged, with revenue at $161.2 billion and EPS of $46.09.

With Apple’s launch event, UBS conducted a survey among people lined up at Apple Stores to buy the new iPad. By definition, the numbers are specific to early adopters who waited in line rather than ordering their device online. Accordingly, the results shouldn’t be considered definitive, but they do offer a very interesting snapshot of this sub-segment of iPad buyers.

One of the interesting stats found in the survey is that while a majority of those waiting in line were replacing iPad 2 or original iPad models, the largest segment, some 46 percent of respondents, were new to Apple’s tablet platform, as shown in the chart below.

UBS Chart

UBS also found that 77% of respondents thought that the best feature of Apple’s new iPad is the high resolution Retina Display. The next most popular new feature was support for 4G LTE wirelesss networks, with 10 percent choosing that feature. The chart below shows that six percent cited the improved camera on the device.

UBS Chart

Among these early adopters, WiFi-only models remained the flavor of choice, with 54 percent of respondents saying they were waiting to purchase a WiFi model. Despite Verizon’s support for hotspots on the new iPad—something AT&T isn’t doing—38 percent said they would buy an AT&T 4G LTE iPad, while eight percent said they would buy a Verizon 4G LTE iPad, as shown in the chart below.

UBS Chart

The last chart, below, we’ll show you shows the capacity preference of these early adopters. 45 percent of respondents said they were purchasing 16GB models, while 27 percent said they would buy the 64GB model. 27 percent said they would buy the middle unit, the 32GB model.

UBS Chart

Mr. Um maintained his “Buy” rating on AAPL. The stock ended the week at $585.57, a gain of just $0.01 over Thursday’s close (+0.00 percent). Volume remained high, with some 29.5 million shares trading hands.

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

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