Sterne-Agee Bumps AAPL Price Target to $740 on iPad, iPhone

Sterne Agee analyst Shaw Wu bumped his price target for shares in Apple Inc. to $740 on Monday, up from $620. In a research note obtained by The Mac Observer, Mr. Wu said that industry checks indicated stronger than expected demand for the iPhone 4S, helped by the addition of China Telecom as a carrier, and the strong launch of Apple’s new iPad.

AAPL Chart for March 20th, 2012

AAPL chart for Tuesday, March 20th
Source: Yahoo! Finance

A rally in the last two hours of trading propelled Apple to yet-another-record close of US$605.96 per share, a gain of $4.86 (+0.81 percent), on what has become moderate volume of 28.9 million shares trading hands. The new close gives Apple a market capitalization of $565 billion.

Mr. Wu noted that Apple’s announcement on Monday afternoon that it sold three million iPads in the first three and a half days of availability was at the high end of his own estimates.

“We had anticipated a strong start based on significant new features including a much improved HD retina display, quad-core graphics, and faster 4G LTE wireless, but this is even stronger than expected,” the analyst told clients.

“In addition,” he wrote, “in our supply chain and industry checks, we are picking up stronger than expected iPhone momentum despite a record setting December quarter where 37 million iPhones were shipped. We believe March quarter shipments will likely be less seasonal than expected helped by 21 countries added to carry the iPhone 4S and the addition of China Telecom as a carrier partner. “

The analyst is now forecasting 60 million iPads in calendar 2012, up from 55 million units. In the March quarter, he is forecasting 28 million iPhones, up from 26 million, and 129.5 million units in the full calendar year, up from 126 million.

He is forecasting revenues of $160 billion for fiscal 2012 (ends in September) and earnings per share of $43.80. That’s an increase from $158 billion in revenue and EPS of $43.30. For fiscal 2013, he is forecasting a whopping $184 billion in revenue and EPS of $50, up from $179 billion and EPS of $48.50.

The rest of the markets all finished lower on Tuesday, with all three major U.S. indices finished in the red. The DOW ended the day at 13,170.19, down 68.94 (-0.52 percent); the NASDAQ closed at 3,074.150, down 4.17 (-0.14 percent); , and the S&P 500 closed at 1,405.52, down 4.23 (-0.30 percent).

*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.