Needham Raises Apple Target to $540 on Strong iPad Sales

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.

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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%).