Evercore Partners Sees Apple (AAPL) Going Back to $700
December 13, 2013 6:43 AM EST
Evercore Partners analyst Rob Cihra reiterated an Overweight rating on Apple (NASDAQ: AAPL)
and raised his price target from $630 to $700 Friday, citing an ongoing belief that the recent iPhone and
iPad refreshes have rejuvenated momentum and helped stabilize gross margins, and that Apple still has
multiple untapped opportunities evolving its integrated iOS software+ hardware+services model.
The analyst sees Apple as having unique hooks and demographics. "As detailed in today's report, we
consider mobile thin-client computing one of the most important trends in tech but also routes to reaching
consumers, where Apple's high-end demo and multiple points of unique leverage keep it king of
monetization," the analyst states. "Like iTunes, Apple mostly looks to monetize by driving more hardware
but we also see its App Store and iOS ecosystem as increasingly leverageable sources of engagement,
measures of user behavior and cross-device tools for advertising and payments in both on/offline
transactions. Although multi-OEM Android clearly now leads in sheer app downloads (60% in CY14E),
we see Apple's demo standing out with iOS still > 2X the revenue monetization (63% in CY14E). We est
Apple earning $4B (+27%Y/Y) of app revenue in CY14 from its 30% cut of $14B in iOS market sales. While
still just 2% of company mix, this under-represents importance to driving iOS ecosystem, and app gross
profit of $3.3B would already contribute 5% of Apple's total, 2X its profit on iTunes and > 4X what it earns
off iPods."
On the potential China Mobile deal, they see it adding +$0.85-$1.70 upside to their CY14E EPS model that
so far includes just 5mil CHL iPhones but could add another +5-10mil. Factoring 10mil unlocked units that
might otherwise have been purchased (est > 20mil unofficial iPhones already on CHL) nets 15-20mil
iPhones potentially to CHL in CY14 for penetration rates they estimate in line with where China Unicom
and Telecom are today.
Chira also continues to forecast iPad growth reaccelerating to +16%Y/Y in CY14 from +11%Y/Y in CY13.
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