Barclays raises its Apple target 26%
April 6, 2009: 12:59 PM ET
Anticipating a new family of iPhones in June and a new ultraportable later in the year, Barclays Capital's Ben Reitzes has raised his price target for Apple (AAPL) shares to $143 from $113 -- a 26% increase -- and upped his earnings estimates across the board.
Reitzes has also changed the way he calculates Apple's price targets, which, if it catches on, could make a significant difference in the Street's view of the company.
With Apple scheduled to release its fiscal second-quarter earnings report on April 22, many high-tech analysts will be taking a fresh look at the company over the next two weeks, and Reitzes is one of the first out of the block.
The main change in Reitzes' near-term numbers is a new, more bullish view of iPhone sales. Based on research that suggests they held up better this quarter than he thought they would, he's upped his estimate of Q2 unit shipments to 2.8 million (from 2.2 million). He's also upped his Q3 estimate to 4.3 million units (from 2.1 million) anticipating the release of new iPhones in June.
For this year and next, he's expecting ...
- 2009 iPhone sales of 17.4 million units (was 13.3 million)
- 2010 iPhone sales of 22 million units (was 19 million)
Reitzes' description of the new iPhones is in line with what the rumor sites have been reporting, including an upgraded camera, new software, better email and security. He's particularly excited about the possibility of a second camera in the front of the phone (for video chatting) and video recording features that could rival Pure Digital's popular "Flip" product line. He also expects an iPhone deal for mainland China -- probably with China Unicom -- no later than June.
Reitzes has less to say about the ultraportable he thinks Apple will release in the second half of 2009, except that he believes the company will address the growing netbook market "in its own differentiated way" -- perhaps with a tablet-like computer/iPod optimized for media, gaming and special functions like mobile iChat.
But perhaps the most significant thing about Reitzes' report is the new way he is calculating Apple's future earnings.
Most analysts are still using GAAP (generally accepted accounting principles) formulas that ignore the money flooding into Apple's coffers from iPhone subscription accounting. (See Apple's growing cash hoard.)
But that share of Apple's earnings, as Steve Jobs put it last year, is getting too big to ignore. So from now on, Reitzes will be calculating his price targets based on so-called non-GAAP numbers that include this revenue stream. He's reached his new $143-per-share target by applying a 15X multiple to a "pro forma" non-GAAP estimated EPS of $7.88 for fiscal 2010.
It will be interesting to see over the next two weeks if other Apple analysts follow his lead.
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