Kaufman on Apple prospects

Apple is likely to continue growth in spite of a looming recession, says Kaufman Brothers' Shaw Wu. Formerly with American Technology Research, the analyst notes that Kaufman is starting its coverage of Apple by posting a "buy" rating and suggesting a 12-month price target of $120. This was calculated using a 15x multiplier on its CY09 FCF estimate, which is $7.89.

Wu notes that while his new firm is worried about the current economic crisis, which is global and turning into a recession in many regions, Apple is still in a position to continue growing its share of the marketplace. This is attributed to several products, namely the new aluminum MacBooks, the iPhone 3G, the fourth-gen iPod nano and the newly cheaper second-gen iPod touch.

Worldwide, Macs are said to represent only 3 percent of the market, despite year-over-year growth of 30 to 50 percent during the last two years. Wu suggests, as a result, that marketshare could double within the next two or three years. Apple finances could be further aided by the iPhone, which already holds 1 percent of the cellphone market.

Looking to future revenue, the Kaufman firm is predicting $35.5 billion for FY09 and $42.8 billion for FY10, with EPS results of $5.05 and $6.45, respectively. This has been deliberately pegged below consensus estimates, says Wu, as a reflection of the impact of the global economy, which Kaufman hopes will recover to a degree by the second half of 2009. The group observes that the situation could improve more rapidly, in which case its estimates would be too conservative.

by MacNN Staff