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Kaufman's Wu changes tune, ups Apple target 26%

April 13, 2009: 10:20 AM ET

Wu 4/13 chartLess than three weeks after sounding a bearish note on Apple (AAPL) by dropping the stock from his firm's "Focus List," Kaufman Bros. analyst Shaw Wu turned around Monday and raised his price target to $152 a share, up from $120.

With Apple scheduled to release its fiscal Q2 earnings report on April 22, many analysts are taking another look at the stock -- and most seem to like what they see.

Last week, Barclays Capital's Ben Reitzes also raised his price target 26% -- to $143 from $113. His move followed Credit Suisse's Bill Shope, who rated Apple "outperform" with a target price of $133; and Canaccord Adams' Peter Misek, who called the stock a "speculative buy" with a $143 target.

[UPDATE: Caris & Co.'s Robert Cihra also raised his price target Monday, to $150 from $120; he thinks the iPhone and the App Store may still be under appreciated by investors.]

In his report to clients, Wu argues that even though Apple has outperformed the indexes -- up 45% since late November vs. 20% for the NASDAQ and 7% for the S&P 500 -- there is room for upside growth. As investors gain confidence, he writes, Apple shares may move closer to their traditional multiples of 20 to 25 times earnings.

Wu cites several near-term "catalysts" to justify his optimism:

  • The World Wide Developers Conference in June, where he expects Apple to release the new iPhone operating system (OS 3.0) and to unveil new iPhone hardware (presumably for release later this summer)
  • Improving sales of Apple's flagship computer line, thanks to the recent refresh of its desktop machines (iMac, Mac mini, and Mac Pro) and the upcoming launch of Snow Leopard, the latest major revision of Mac OS X.
  • A wild card: "The potential for a new form factor, perhaps Apple's answer to the netbook, with a large screen iPod touch-Mac hybrid."

Wu also issued something rare for an analyst: a mea culpa (albeit one couched in "arguablies"). Referring to his March 24 report on Apple, he writes:

"We had arguably been a bit defensive with the stock over $107, taking it off our Focus List given we are arguably still in a bear market and investors not willing to pay more than 15x for quality hardware names. However, it appears that investor sentiment has turned a bit more constructive and willing to pay for quality names as we have seen with Apple, Research in Motion, Google, and Amazon."

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About This Author
Philip Elmer-Dewitt
Philip Elmer-DeWitt
Editor, Apple 2.0, Fortune

Philip Elmer-DeWitt has been following Apple since 1982, first for Time Magazine, and now on the Web for Fortune.com.

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