UBS: $160 AAPL target, 80% Leopard margin
updated 05:55 pm EDT, Tue June 12, 2007
$160 AAPL price target
Reacting to announcements made at WWDC, UBS Investment Research Analyst Ben Reitzes has set a $160-per-share price target for Apple Inc., predicting that the launch of Leopard will generate more than 50% growth in software segment growth year over year on profit margins of more than 80%. Reitzes also believes new iPods will be launched in the Fall, helping to drive revenue acceleration through the end of the year and into 2008, and notes the strategic importance of Safari's move to Windows.
A research note from UBS paid close attention to the announcement that Electronic Arts and ID Games will be bringing several popular gaming titles to Mac OS X. Reitzes says "Apple currently is far behind Windows in terms of gaming capabilities. Now that Apple is using Intel processors and gaining share, it seems that this gap is set to narrow a little bit [...] as Mac users, we are pleased with this development."
The note also predicts that Leopard adoption will be greater than Tiger when the upgrade starts shipping in October. "There are 22 million active Mac OSX users right now with 67% of them running Tiger and 23% running Panther. Given all of the improvements in Leopard, we believe it could experience adoption even greater than Tiger when it starts shipping in October. "
Reitzes points to the importance of Safari's port to Windows from a strategic standpoint, saying that the move is designed to "give Windows users a taste of Safari will help the mass market become much more familiar with the iPhone interface, driving higher sales long-term."
Finally, the research note comments on a recent rumor that Apple will begin offering $3 movie rentals from the iTunes Store and the implications for Apple TV. "Apple could drive growth with its new media hub by allowing pay-per-view type services. [...] We continue to believe that the Apple TV could eventually become a challenger in the 420 million unit DVD player market as more content becomes available on iTunes—like the YouTube arrangement announced recently."
