Apple 2.0

Covering the business that Steve Jobs built

Analyst gives Apple a boost

May 26, 2009: 12:43 PM ET

MS - mobile subscribersEight months ago, Morgan Stanley and RBC Capital both downgraded Apple (AAPL), triggering the company's worst selloff in eight years, a 23-point drop that lopped nearly $18 billion off its market cap.

RBC's Mike Abramsky reversed his position last month, raising his price target for Apple from $95 to $165.

On Tuesday Morgan Stanley's Kathryn Huberty followed suit, raising her target from $105 to $180 and sparking a rally that lifted Apple's stock price 8.28 points (6.67%), to close at $130.78 a share.

Like most Apple analysts, Huberty expects the company to introduce a new iPhone this summer and to cut its prices on existing models -- and she makes a strong case that the resulting revenue spike will offset any slowdown in Apple's Mac and iPod business.

But the most interesting part of her report to clients is the fresh look she takes at the mobile Internet market -- a market she describes as "one of the biggest opportunities in the history of the technology industry."

Among her findings:

  • The iPhone has already dramatically changed the behavior of mobile device users
  • Its ultimate target are the 4.1 billion people worldwide currently using cell phones
  • The opportunity to connect those users to the Internet is arguably 40 times the opportunity to connect 100 million PCs to the Internet in the 1990s
  • Apple is emerging as the "clear leader" in the race to get those users connected.

Accompanying her report are some particularly well-designed charts. Our favorite is the one that shows how Apple has changed user behavior:

MS - user behavior

The expanded slices in the upper left-hand quadrant of the pie chart correspond roughly with our own experience -- without, of course, all that game playing.

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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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