Apple's a Buy at $130, According To Citigroup

It may be too late to get in on Apple Inc. (AAPL) right now, but if the shares fall back to US$130, investors might want to consider buying. That’s the opinion of Citigroup’s Richard Gardner, who was among several analysts who hiked their price targets and earnings expectations for Apple on Thursday after the company’s third quarter results showed better-than-expected computer sales and margins.

But while Mike Abramsky at RBC Capital Markets moved his price target up US$15 to US$175 and David Bailey at Goldman Sachs gave his forecast for Apple shares a US$30 boost to US$165, Mr. Gardner boosted his target by a whopping US$50 to US$160 per share. He is maintaining a “hold” rating on the stock.

While he expected second quarter iPhone sales results (only two days in June) would be the focus of Apple’s report on Wednesday, shipments of 270,000 in the quarter and company guidance of 730,000 units disappointed. As a result, Mr. Gardner cut his iPhone estimates for calendar 2007 from 3.5 million units to 3 million. His 2008 and 2009 forecasts remain at 8.5 million and 15 million respectively.

It was Apple’s computer results that stole the show, providing all of the revenue upside in the quarter, he told clients in a note.

Comments

[brewer:]

iPod and iPhone impress the stock market wonks, but the real deal is the Macintosh. The other stuff is just icing on the cake. Macintosh is seriously stealing market share away from Microsoft, who only offers Vista, a very poor imitation of OS X (just as all versions of windows have always been poor implementations of Apple's operating systems ideas). The only problem for Microsoft is that no one from gamers to IT staff really like Vista, and M$ won't have another option for many many years. This trend is definitely on the increase. Mac sales may not outnumber PC sales for a long time, but it could happen for consumers pretty quickly.

The other shoe to drop this fall will (I think) be a low cost Mac tower or possibly a version of Mac OS X Leopard for the generic (non-apple) PC.

iPhone is a game changer, certainly. But I believe Macs will be nearly as popular as windows PCs among US consumers within the next 2-3 years.

2007 Jul 30 11:20 AM

[Camden:]

The analysts are behind the curve as usual.

bpicke, Interesting ideas you've got there. I doubt you'll see Jobs license OSX for the PC market as that would invite too many worms into in Apple. I consider myself a raging Apple bull but I would never even consider that Macs could capture 40% of the U.S. consumer market in three years. Dell and HP are much too strong as competitors to let that happen and Apple is not willing to give up its fat margins to even try to really compete on price across the computer product line – which is what they'd have to do to gain that kind of market share.

2007 Jul 30 12:14 PM

[Werlingdervish:]

As Jobs said himself earlier this year it is a post PC World. Computing wise an iPhone is about as powerful as a PC was just a few years ago. One needs to think literally outside of the PC "box". Think iTablet for example with the iPhones touch screen interface for field work. Think super iPhone that can be docked in a cradle with peripheral keyboard, hard drive, full size display etc.

The best feature of Apple TV is that one can stream video wirelessly at high speed with Airport Extreme (n). In fact all peripherals to the dock may go wireless. Maybe, K-12 teachers will have students give homework wirelessly from their iTablets via Apple TV with extra storage. Or gamers that will play against each via Apple TV and a Apple iTablet with wireless controller.

If one looks at how Leopard and iLife is designed, Apple is already doing away with too many "windows" in favor of cover flow, spaces, and other software 3D tricks that maximize the real estate of a smaller screen. With the power and storage capacity of flash driven handhelds doubling every year I expect that most users don't even need a "Desktop box." So I think Apple is already years ahead of Dell and Microsoft in the Post PC world. They may already have won the post PC world by simply getting there first with the mostest.

2007 Jul 30 01:20 PM