Analyst upgrades Apple

Research firm American Technology Research today added Apple to its Focus List and strongly recommended investors to purchase shares of the Cupertino-based company. "While we have been Apple bulls for years, we were hoping to see a similar pullback to last year to become even more aggressive in our stance," said American Technology Research senior analyst Shaw Wu. "Given our recent datapoints, we are incrementally bullish and believe investors should buy Apple aggressively at current levels as we add it to our Focus List today." The firm picked up three key iPhone developments in its recent analysis which suggest a material positive impact on the firm's forward assumptions, and raised its estimates above Wall Street consensus as well as its price target to reflect that belief. According to Wu, sources indicate that a rebate or carrier subsidy for iPhone of $50-150 is under serious consideration.

Additionally, Apple will likely receive a 'bounty' for each customer signed up through its stores. Finally, Wu believes Vodafone is most likely Apple's carrier in Europe for its forthcoming iPhone handset.

With regard to Europe, Vodafone's 200 million subscriber base -- compared to AT&T's 61 million -- with broad country coverage and investment in advanced technologies make the carrier a promising fit for Apple, according to the analyst.

"Our sources indicate that a rebate or carrier subsidy for iPhone of $50-150 is under serious consideration," Wu wrote in a research note obtained by MacNN. "From AT&T's perspective, a rebate is a great marketing tool to entice a customer to sign up for 2-year voice and data plans which cost $75-100 per month, meaning $1800-2400 in 'guaranteed' bi-annual revenue."

Apple will likely participate in a revenue sharing agreement alongside a 'bounty' paid for each customer that signs up for an iPhone contract through its own retail stores. That agreement, according to Wu, will result in Apple collecting a monthly fee that will fall between $5-10 per user.

Separately, Wu suggests investors ignore rumors about iPhone delays in the near future.

"While we cannot confirm at this point, we would view any weakness on such rumors as a buying opportunity as longer term, regardless of whether iPhone launches on time or a month late, it is irrelevant to Apple's ability to execute longer term and their strategy for penetrating the handset market."

American Technology Research offered new estimates for fiscal year 2008 at $31.1 billion in revenue and $4.15 in earnings-per-share, up from $28.8 billion and $3.75 respectively.

"We believe there is substantial upside to Apple and longer term investors will be rewarded in owning one of the highest quality, rapidly growing, innovative large cap companies," Wu said.

The analyst upped his price target to $145 and reiterated a 'Buy' rating on Apple shares.

by MacNN Staff