Apple Upgrade Not Groundbreaking

I don't normally talk about analysts' comments in stand-alone posts because most of the analyst community seems to be engaged in groupthink, but even before the market surged at 10 AM Tuesday on "better than expected" consumer sentiment, NASDAQ was green. Really they should just rename NASDAQ Research in Apple's Google; these guys dominate.

I don't see anything groundbreaking or new in the Apple (AAPL) analysis (basically what I wrote about this weekend in my South Korea piece), but we've been in a stage for nearly 3 months now where all news is good news. Looking at Apple's chart, it was actually weakening (broke down below 20 day moving average for 2nd time in as many weeks) and starting to get worrisome, but 'thankfully' our analyst came to the rescue. Now it will be interesting what it does when it gets to highs reached a few weeks ago. For this market to continue ever upward; the "generals" will be needed.


Research in Motion (RIMM) is up in kind, and Palm (PALM) continues its rocket-like ascent [May 19: Palm to Launch Pre June 6th at Apple iPhone Pricing: $200]... I continue to love the smart phone market as they take share from "normal phones"... and hopefully by 2014 or so we can be like South Korea. [NYT: In South Korea, all Life is Mobile]

Via AP

• Shares of Apple Inc. soared on Tuesday after an analyst upgraded the stock on her belief that the iPhone's growth potential has been underestimated. "We believe Apple is emerging as the clear leader in the battle over the mobile Internet," said Morgan Stanley analyst Kathryn Huberty, in a research note. "Smartphones are taking increasing share from traditional handsets and Apple's iPhone currently leads market share of the mobile Internet," she said.
• She sees mobile Internet, where people use their cell phones to go online, as the next biggest market opportunity in the technology sector. (this is new?)
• The iPhone currently has a 38 percent share of the mobile Internet market, up from 5 percent a year ago.
• The biggest drawback to the iPhone has been the cost of the phone and plan of service. So Huberty sees coming price cuts to the current model of the iPhone driving demand by 50 to 100 percent, depending on the size of the discount. Moreover, 15 percent or more of current iPhone users upgrade to a newer version. She expects Apple to cut the current generation iPhone's price to $99 to $149, from $199, at the minimum. (that would be interesting, especially on the lower end since Apple is selling itself as a premium franchise for a premium price)
• Huberty said Morgan Stanley's annual Apple survey of 2,500 consumers showed that among people who were not "extremely" interested in buying an iPhone, demand would rise by 58 percent if the phone drops in price to $150 and up 124 percent if the phone costs $100. Moreover, 35 percent said they're more likely to buy an iPhone if it has a lower-cost plan.
• As such, Huberty upgraded Apple to "overweight" or buy from "equal-weight," or hold. She also raised her 2009 earnings forecast to $5.48 per share from $5.23, to $7.03 from $5.38 for next year and to $8.83 from $5.85 in 2011. The analyst's new estimates are far higher than the average estimate of analysts for 2010 and 2011, which are $6.19 and $6.51, respectively. Huberty raised her target price to $180 from $105 for the next 12 to 18 months.
• Huberty now expects Apple to sell 42 percent more iPhones in 2009, to 24.8 million units, and 61 percent more to 36.2 million in 2010. (recession reschemession?)
• Huberty does see some risks to her bullish call on Apple, however, including a smaller-than-anticipated price cut on the iPhone that could mute demand and weaker Mac and iPod sales than expected.

"Changing Behavior by iPhone Users" graphic via

Fortune

(click to enlarge graphic)

Disclosure: Long Research in Motion in fund; no personal position

Comments

[TonyNasir:]

I suspect that AAPL upgrade was deliberately timed at stemming the market downfall at a critical level. I have already submitted a formal request to SEC to look into the suspected criminal act by the responsible financial firm...plus another one for acting in a very similar fashion last week.

May 27 08:41 AM

[top_tier:]

Speaking of being "engaged in groupthink", the title of your piece is "Apple Upgrade Not Groundbreaking", how do you know what Apples upgrade is except for the fact you're utilizing "groupthink" for your analysis?

You bloggers are priceless.

May 27 08:45 AM

[stay strong:]

TonyNasir, they were doing the same thing to push the market down back in November. Come on and do you remember when people said AAPL and RIMM would go to $50 and $35?

I am so glad I was never short and bought RIMM at $42 cause I was optimistic

May 27 09:11 AM

[Anthony B:]

Tony Nasir, I agree that the timing of the announcement was pretty much perfectly timed to provide support for this rally. However, if anything the analyst was late on the realization that the iPhone is providing more than enough growth to demand a higher price for AAPL. Maybe the analyst just didn't want to be any later.

May 27 09:19 AM

[AlD:]

top_tier - I believe the title of this article was referring to the Morgan Stanley upgrade, not the rumored features of the upcoming iPhone refresh.

May 27 09:34 AM

[iJah420:]

This stock can no longer be manipulated by the shorts.

I SAY GOOD!!!

AAPL's balance sheet is to good @ this point. Apples product line is far superior to the competition. There are too many good things going for AAPL right now to be snowed by some overpaid ... i mean bribed ANAList who has no idea about where this company came from and the current culture in place.

This is now a long term investment. The only way the stock will dive again will be on the rumor and spec of Jobs health. Well let me tell you something folks, Apple is so much more than Steve Jobs @ this time in 2009.

AAPL Long.

For the record look @ the released stats on mobile web traffic.

apple20.blogs.fortune....

OH and BTW.... NOKIA's App Store Launch was a HUGE SUCCESS!!!!! YEAH OK!!! NOT!!!

I'm so sick of the naysayers.... I'm DONE HERE!!

Have a Grateful Day.... buy AAPL.

May 27 10:12 AM

[TraderMark:]

yes that is true. I have no idea what top tier is even saying.


On May 27 09:34 AM AlD wrote:

> top_tier - I believe the title of this article was referring to the
> Morgan Stanley upgrade, not the rumored features of the upcoming
> iPhone refresh.

May 27 10:43 AM

[iJah420:]

This site has bcome a TOTAL JOKE!!!

Thanks sys admin....for pulling my comments on THE TRUTH!!!

I'm DONE with Seeking Alpha....

May 27 10:44 AM

[brewer:]

I figure they want to pump it now and then they can dump it if the new devices at WWDC are not ground breaking.

May 28 10:07 AM

[winindthedust:]

This will be a classic pump and dump.
WE WILL SEE A STEADY SHARE PRICE RISE UNITL JUNE 8TH!

To profit:

Buy Apple now, as much as you can.
Sell the day of new products announced.
Re-buy on the new stock lows.
Stock will then continue steady climb until Christmas.

There is also significant money to be made with options, but proceed with caution. The duration and timing will be difficult to gauge.

May 29 08:47 AM