Wednesday, July 22, 2009

Apple (NASDAQ:AAPL): Colour on quarter - Deutsche raises target to $225

Apple (NASDAQ:AAPL) is getting lots of positive analyst commentary following results out last night.

Here are some of the highlight:

- Deutsche Bank is raising their target to $225 from $150 noting iPhone shipments of 5.2M beat their model (DB at 5.0M) with robust demand outstripping supply. The iPhone remains immensely profitable (est. 60% GM) as it added an incremental $0.79 in EPS in the Q on a pro-forma basis (adjusting for subscription accounting). Further, Apple will extend the geographic reach of the iPhone from 18 to 80 countries by the end of the Sept Q, greatly expanding its addressable market. Further, the firm believes Apple is on track to partner with China Unicom as early as this Fall. As a result, they raise their CY09 iPhone unit estimate from 23M units to 26M (Sept Q increased from 6M to 8.5M).

New product ramps on the horizon to drive incremental demand
Apple shipped 2.6M Macs which was in-line with our model and 10.2M iPods, modestly below Deutsche's estimate (vs. DB at 10.5M iPods). They believe Apple’s new product pipeline is full including a refreshed iPod line, the introduction of Snow Leopard in Sept. and new Mac form factors possibly ramping in 2H09.

Deutsche Bank adjusts their FY09 EPS to $5.87 (vs. prior $5.50) and FY10 EPS to $7.15 (vs. prior $6.25). Normalizing for iPhone accounting results in pro-forma EPS of ~$9.50 in FY09 (vs. prior ~$8.50) and $11 in FY10.

- Morgan Stanley is bumping their target to $195 saying two important risks to their Overweight thesis were taken off the table with C2Q09 results. First, Macs resumed share gains even without a sub-$700 notebook product. Second, long-term gross margin guidance of "about 30%" was de-emphasized with stronger high margin iPhone sales and prepayments of constrained components. With these risks muted, iPhone sales > supply, and Mac unit upside, they see a high likelihood of the stock approaching their new $195 price target by calendar year-end.

- JP Morgan recommends that investors continue building or adding to positions in Apple. The company reported big June quarter results, and the guidance should be enough to keep investors’ interest. Key drivers were the Mac surge that we highlighted previously, alongside strong iPhone sales and favorable margin trends. Firm believes there are plenty of catalysts to keep numbers and the stock pointing up. They reiterate their Overweight rating and are lifting their Dec 09 price target to $170.00 from $167.50 previously.

- Canaccord is upgrading AAPL to Buy with a $200 price target.

Notablecalls: AAPL is trading 6 pts higher in the pre mkt (right about where it finished in after hours yesterday). I'm somewhat hesitant to buy it here despite the new Street high target from Deutsche and overall positive comments from other firms.

I think it can do $158-$159 in the s-t today but the risk of a blow-off top is exceedingly high. Most of the upside is coming from the iPhone and as DB notes Macs were not that hot.


Tommo_UK said...
This comment has been removed by the author.
Tommo_UK said...

Mmm.. yes... right... Mac sales not that hot.. sales were "only" 25% higher this June compared to last year.

notablecalls said...

ah, Tommo. I did miss you, I must say.

how's it going?