updated 10:36 pm EDT, Tue June 24, 2014
Pundits' expectations for 'iPhone 6' models fuel upbeat speculation
Analyst Charlie Wolf of investment firm Needham has taken the unusual step of breaking his twice-yearly cycle of AAPL price target updates, revising a forecast announced back before the most recent stock split that has remained "underwater" -- below the trading price -- since well before the split occurred. Wolf's previous guess of $590 (or a split-adjusted $86.32), issued back in February, has now been upgraded to a conservative $97 target. Other analysts have also raised their estimates for the company recently.
RBC Capital Markets upped its 12-month target to $100 per share, which would put it in range of breaking its all-time record of $100.72 (again, split-adjusted) -- a feat many believe will happen this year, though market factors could again lower the price as it heads into and through 2015. Currently, the stock is just slightly higher than it was before it split back on June 2, closing on Tuesday at $90.28 per share. Overall, AAPL is up 14.25 percent, or $11.27 per share, since the start of the year, though it is down about $3.40 per share from the 52-week high it saw on the first post-split trading day.
In a note to investors, Wolf explained that three factors had led him to raise his estimate early. The first was the surprise strength of the iPhone 4S in the March quarter, which is believed to have accounted for 25 percent of all iPhone sales during the period. The two-and-a-half year old smartphone is proving to be popular in developing markets, and is capable of running Apple's next big mobile update, iOS 8, which is expected in the fall and should help continue to momentum with price-conscious and emerging-market consumers.
The second was the surprise announcement of a new, Mac-and-mobile-centric programming language called Swift. Wolf saw it as the most significant announcement of the recent WWDC conference, allowing the company to "leap ahead" of the tools available for the Android platform. "If software does indeed drive hardware choices," he said, "...this in turn should translate into an increasing percentage of high-end Android users switching to the iPhone when they upgrade."
This prediction feeds into the allure of a bigger-screen iPhone that has driven other analysts to raise estimates. A new survey has indicated that some 35 percent of Android owners would consider switching if Apple made iPhones with larger displays. Wolf acknowledges his own expectation for that to happen with the "iPhone 6" as his third factor for raising Needham's target price.
Cowen & Company also revised their estimates for AAPL earlier this month to $102, up from $96, and J.P. Morgan analyst Rod Hall believes the "iPhone 6" launch will propel the stock to $108 per share. He also anticipates other new product launches in mid-to-late 2014 that will boost the company's growth and standing.
Hall originally called for an $89 price target earlier this year, but expects new products such as the "iWatch" will again push the company to rule the holiday buying season alongside a redesigned iPhone. He was also impressed with the Swift announcement, agreeing with Wolf that the move should entire more and faster development of applications for both the Mac and iOS platforms.