- Today is an important day for Apple (NASDAQ:AAPL). Piper Jaffray is out with a call upping their tgt to $205 from $160 saying they have developed a model that includes iPhone booked revenue and AT&T revenue sharing that results in an additional $2.49 to their published CY09E EPS of $4.82 for total estimated EPS of $7.31.
Firm believes Apple and AT&T have an iPhone revenue sharing agreement. Although they do not know the details of the agreement, the firm estimates that AT&T gives Apple $3 per month (during the 24-mo. contract) for every customer using the required data plan and an additional $8 (total $11) for every new subscriber that transfers service to AT&T.
Piper emphasizes that their revised target is based on Apple's ability to do 45m iPhone units in CY09 and has little to do with iPhone sales in CY07 and CY08. One thing they learned with the iPod is that when a device is game-changing, the demand will come. However, it is difficult to predict the inflection point. For example, in December 2004, Street expectations for iPod ran wild with investors anticipating 8m iPods, but Apple only sold 4.6m. It was feared at the time that the iPod would never go mainstream.
Conversations with investors over the past month suggest awareness of potential for iPhone units is high, but awareness of potential resulting impact to earnings is low. If Apple can sell 45m units in CY09, the earnings power and historical multiple ranges suggest $205 price target is reasonable.
Notablecalls: This is the first above-$200 tgt on AAPL. The stock is in a strong uptrend and I think Piper's call will be greeted positively by traders this morning. The call may be worth several points of upside as iPhone flow continues to be the main thing moving the stock. Be ready to pay up early on.