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AAPL Stock: 100.96 ( -0.83 )

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Needham ups Apple stock target to $235

updated 09:45 am EDT, Tue September 15, 2009

Jump linked exclusively to iPhone

Needham & Co. is raising its price target for Apple stock from $200 to $235, says one of the research firm's analysts, Charlie Wolf. The bump is based entirely on the performance of the iPhone, Wolf notes, and in particular the effects of the App Store. The store is said to have had "explosive" growth since January, and it is thought that a "virtuous circle" involving app developers and smartphone buyers could soon push iPhone sales higher.

A number of phone buyers are expected to migrate from basic cellphones to smartphones, and gravitate towards the iPhone, due to the amount of apps available. This in turn may further spur app developers, particularly in light of the introduction of Genius recommendations for apps. The option is a "first step" in helping app shoppers find titles they might genuinely enjoy, says Wolf.

At the same time, Needham is lowering the value of Apple's other product businesses. The firm now anticipates fewer people switching from Windows PCs to Macs, for instance; the slide is based on a reexamination of the halo effect of iPhones and iPods. Apple is likewise expected to make less profit on Macs as a result of MacBook price cuts in June, and it may even choose to subsidize future Mac prices using money from the iPhone.

A "Strong Buy" rating is being maintained, and forecast GAAP earnings per share for 2009 and 2010 are being kept at $5.80 and $6.70.




by MacNN Staff

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Comments

  1. Constable Odo

    Joined: Dec 1969

    +2

    I wonder why he's expecting

    Apple desktop sales to start sliding down? I really thought the halo was bring more switchers to Apple and that desktop sales were going to be higher this year than last year. A number of people I knew that bought iPhones eventually switched to Macs because they liked the customer support and ease of use and they believed desktop Macs would be simpler for them to use and most did find it that way. I'm rather disappointed that desktop Mac sales haven't improved to a greater degree. Hopefully, it's just a temporary blip due to the economy and to a lesser degree the netbook explosion. Those cheap prices must be hard to resist. I still think the netbook sales rise is due to average consumers' ignorance of the netbook's limitations.

  1. byRyan

    Joined: Dec 1969

    +2

    subsidize this

    Mac has no need to subsidize! They are enjoying healthy product margins because they want too. Apple knows that if they lower the price, demand will increase, and they will have to produce more units with less quality control. Trust me - if all apple cared about was selling computers, they could just lower the price, make less per box and sell more boxes.

    That is not apple's goal - they want to artificially limit what they sell, and they do that by raising prices until they scare off all the cheapskates

  1. shawnde

    Joined: Dec 1969

    +1

    re: I wonder why he's expecting

    Actually I agree with you completely. I think he's dead wrong on that Mac business. I think the Mac Business is gonna do better this year than last, but the shift will be towards laptops from desktops.

    Netbooks are not impacting Apple's business as much as everyone is saying. However, it is true that Apple's Mac Business hasn't grown as fast as the iPhone in the past couple of years, but that makes total sense. The Mac has been around for over two decades, where as the iPhone has been around for over two years. Of course in its first few years it will have explosive growth. So did the iPod, and then it plateaus. The iPhone will plateau eventually.

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