Analysts Mixed on WWDC Announcements

Analysts are so far mixed on the announcements Apple made at its annual World Wide Developer Conference Monday. On the Bullish side, Barclays Capital analyst Ben Reitzes raised his estimates and price target for AAPL based on the expectation that iPhone 3GS and a cheaper iPhone 3G will increase demand and raise sales. On the side with the Mehs, UBS's Maynard Um said the announcements were in line with expectations and maintained his price target.


Barclays' Ben Reitzes was pleased with the number and nature of the products Apple announced, which included a new iPhone, updated MacBook Pros, price drops, more details and a release date for iPhone OS 3.0, and an announcement for Snow Leopard's release.

"While the iPhone announcements were expected," he wrote in a research note obtained by The Mac Observer, "we believe this was a very good WWDC for Apple's earnings momentum given the number of new product announcements and price adjustments that will likely help stimulate sales this calendar year. The iPhone and software developments are exactly what we were hoping for; while the Mac new products and pricing adjustments were a pleasant surprise."

"We are raising our estimates and target based on prospects for new iPhones and Macs to stimulate incremental demand," he added.

Mr. Reitzes's new price target for AAPL is US$173 per share, up from $155, which is based on a 15x multiplier on fiscal 2010 pro forma earnings per share (EPS) estimates of $9 per share (plus cash holdings per share). He is maintaining an "Overweight" rating on the stock, versus a sector rating of "Neutral."


UBS's Maynard Um took a glass-neither-full-nor-empty approach in a research note obtained by TMO titled "WWDC Largely As Expected." This includes the iPhone 3GS, which included all the features and improvements Mr. Um was expecting, and thus was already built into his models for Apple.

He also wrote that the price decrease on the previous generation iPhone 3G will help spur demand, though AT&T's data plan pricing will be a factor into how much demand there will be, but he said he also expects AT&T's subsidies for the cheaper iPhones to lower. That would decrease Apple's margins, offsetting the benefits of increased sales.

Mr. Um took a similar approach to the impending release of Snow Leopard, which will have an upgrade price of $29 for Leopard users. "given its low price," he wrote, "we would not expect any material margin benefit."

Mr. Um maintained his price target of $130 per share -- still below the current trading price of the stock -- and a "Neutral" rating. Mr. Um's valuation starts with a 13x multiplier on pro forma 2010 EPS estimates plus $32 per share in cash.

Shares in Apple continued to shed pre-WWDC gains, closing lower at $142.72 per share, a loss of $1.13 (-0.79%), on moderately strong volume of 24.1 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.