Shoppers willing to pay for luxury of Apple?

People buying higher-end products are largely responsible for Apple's profitable Q4 results, says Kaufman Bros. analyst Shaw Wu. Apple generated $1.82 in EPS for investors, off $9.9 billion in revenue; both figures are well above prior Kaufman predictions, and still further above Apple's own guidance. Wu attributes the performance to several factors, such as Snow Leopard, cost discipline and component prices that were lower than expected.

The most important factor is said to be a shift towards higher average selling prices, contributing to a sizable gross margin of 36.6 percent. The public is willing to spend deeply on Apple products, according to Wu, including the most expensive ones, in spite of an economy in recession and overall industry trends towards buying cheap. People see Apple as being worth the extra money charged, the analyst concludes.

Wu is raising his price target for Apple stock from $214 to $235. Future aids to profits are expected to include additional Snow Leopard sales, the recent iPod refresh, updated desktop Macs and a "potential new form factor," likely referring to a rumored tablet device. FY10 is now projected to produce $41.7 billion in revenue, with $6.80 in EPS.

by MacNN Staff