Needham & Co. analyst Charlie Wolf this morning raised his target price on shares of Apple (AAPL) to $450 from $375, writing that the “trajectory” of sales of the iPhone and iPad now appears to be higher than he originally expected.
Wolf reiterated a Buy rating on Apple shares.
Wolf now estimates 300 million smartphones were sold in total last year, up from a prior expectation of 250 million units.
Wolf also notes his estimation for Apple’s iPhone sales last calendar year was only 40 million, which turned out to be below the actual 47.5 million Apple sold.
For 2011, he’s now modeling 75 million units. Wolf sees Apple with a 16% share of smartphones now, moving to perhaps 22% in the next five years, with the assumption Verizon Communications (VZ) sells 16 million units this year and 16 million next year. Wolf assumes iPhone will rise to 22% of smartphones over the next decade.
As for the iPad, Wolf cites a book by Everett Rodgers, The Diffusion of Innovations, pertaining to hybrid corn growth in the 1920s, as a model for how new technology is adopted by society. He notes that personal computers in the 1980s were another new technology, like corn, that grew quickly. The result is an “S-curve,” with slow early growth, then acceleration, then finally slowing again.
The iPod was an S-curve, too, writes Wolf. He then models some regional potential ownership statistics, to arrive at a worldwide addressable market of 875 million for all manner of tablets. Wolf comes up with 35 million tablets for this year. He models Apple selling 90% of those, or 31 million units.
And Wolf notes:
Our forecast of the iPad’s ultimate share of the media table market is materially higher than the forecasts of most pundits. In our opinion, that’s because they’re confusing the media tablet market with the smartphone market. Sales of smartphones [...] have been driven by the carriers who can turn the phones into revenue producers by loading them with their own content, software and services (colloquially referred to as “crapware”). However, carriers should play a far more limited role in the distribution of tablets, because tablets are primarily content consumption, not communications devices. We believe the media tablet market will more closely emulate the portable music player market, where the iPod continues to dominate, than the smartphone market.
As a consequence of the iPhone and iPad estimates, Wolf raised his estimate for the material contribution to Apple revenue of both products: iPhone may contribute $240 per share to the value of Apple this year, up from $191; iPad may contribute $43 per share, up from $35 previously.
Apple shares this morning are up $3.08, or almost 1%, at $349.58.
I should note that Apple’s price target was also raised to $465 from $445 at Susquehanna this morning; more on that later. |
