updated 05:45 pm EDT, Tue June 7, 2011
Price targets as high as $510 follow Apple Keynote
Apple's WWDC Keynote, announcing iCloud, iOS 5 and Mac OS X Lion, has sparked positive reaction from numerous Apple-focused financial analysts, with raised target prices between $460 and $510 per share. The analysts predicted increased sales of the iPad 2, acceptance of Apple's iCloud and iTunes Match service and the popularity of iOS 5 on refreshed hardware in the fall as part of the reason for their enthusiasm for Apple going into the remainder of the year.
UBS's Maynard Um is projecting $510 per AAPL share, focusing on the halo effect of the new software at WWDC driving future hardware sales. Um focused on features like iMessage, wireless sync, improved notifications and Twitter integration in iOS 5 and its integration with iCloud. Analysis of WWDC-quoted sales figures for iPads extrapolates to 8.2 million iPads in the third quarter of 2011, with more possible if production ramps higher, he said. Um predicts a $510 share price based on a 20x multiple of UBS's 2011 EPS estimate of $25.11.
Canaccord Genuity's Michael Walkley bumped Apple stock projections to $485 per share, reiterating a BUY rating, based on expected user growth over the next several years due to the integration of the Mac OS and iOS on display at WWDC. Walkley's focal point is iCloud’s ability to integrate applications, data, photos, and video files across Apple’s full line of iOS and Lion-powered Mac devices, which should drive increased customer loyalty and thus hardware and software sales.
Walkley's analysis of Apple's 25 Million iPads sold leads to a projection of 7.9 million iPads sold, lower than Um's projections above. That leads to a 2011 EPS of $23.51 to $24.31, 2012 EPS range of $26.69 to $26.97 and an 18x multiple of the EPS generating a $485 price target for AAPL stock.
Sterne Agee's Shaw Wu predicts the lowest target of the three analysts, at $460 per share, but is generally in agreement that WWDC's announcements will have long term positive affects on Apple's growth. Apple's iCloud is the focus of Wu's interest, with the digital hub nature of iCloud a major selling point. The ability to hold music in the cloud for $25 per year per user, as well as projected additions of movies and TV shows in the future, will help recoup lost revenues due to piracy for Apple and its studio partners.
Wu is also positive on iMessage offering a BlackBerry message service competitor, Twitter integration and wireless sync. Wu maintains his "Buy" rating, stating that Apple's stock is positioned to outperform in a tough macroeconomic environment, citing a good strategy and vertical integration. The Sterne Agee price target for AAPL is $460, based on a conservatively applied 12x multiple of the 2012 EPS estimate of $31.10 plus net cash.
Investors can watch the keynote firsthand, as Apple has posted a WWDC Keynote 2011 streaming video, running just under two hours.