Apple 2.0

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iPhone 4S: Analysts weigh in

October 5, 2011: 6:49 AM ET

Disappointed there was no iPhone 5, but wowed by Siri and the speed of the rollout

Photos: Apple Inc.

Below: A roundup of what the sell-side analysts told their clients after Apple's (AAPL) iPhone 4S announcement Tuesday. The tone of their notes was generally positive, which may help explain why the stock, which had fallen more than $20 during the course of the event, managed to close at $372.50, down only $2.10 (0.56%) for the day.

Wells Fargo's Jason Maynard: "We attended Apple's big iPhone event on Tuesday, 10/4, and came away feeling good; probably better than most about the new line-up. While there is obvious disappointment that the company did not release a new form factor iPhone 5 – we think the upgraded iPhone 4S provides plenty of new features to promote upgrades... We believe the Siri virtual assistant that is integrated into iOS is revolutionary, and a clear differentiator for Apple."  Outperform. Valuation range $460-$480.    

Piper Jaffray's Gene Munster: "The bottom line is that while investors may be disappointed by the lack of a redesigned iPhone, we believe the iPhone 4S will meet or exceed unit expectations, as it represents the first iPhone launch at two major US carriers (Verizon and Sprint) along with KDDI in Japan. We expect long lines when the phone launches on 10/14." Overweight rating with a $607 price target. 

Barclay's Ben Reitzes: "This pace of this roll-out is one of the fastest in the iPhone's history and points to a big December quarter push (we note that December is a fourteen-week quarter this year). While there were few surprises, we believe the sell off in shares was overdone and in the long term Apple has laid the ground work to gain significant share." Overweight/Positive rating and $555 price target. 

Morgan Stanley's Katy Huberty: "We are buyers on any sell-off post today's iPhone announcement. Investor expectations were high heading into the event and Apple did not meet some of them, e.g., multiple new phones. However, the market tends to forget that software is what differentiates Apple from the competition, and that was the case again today with iOS 5, which featured Siri intelligent assistant and iCloud content management." Overweight. Price target: $470 (9/13/11).

Citigroup's Richard Gardner: "While the shares underperformed today in part due to the lack of exterior redesign, the iPhone remains arguably the most compelling smart-phone in the mkt based on the new internal components and software upgrades announced today."  Reiterate buy and $480 target.

Deutsche Bank's Chris Whitmore: "Sorry folks, no iPhone 5 today... We believe ~15 months is a long time to wait for a processor speed bump and higher resolution camera (vs. typical 12 month iPhone refresh cadence). In addition, the absence of a more aggressively priced mid-range iPhone misses a significant near-term growth opportunity.That said, ... Siri is a game changing technology and extends APPL's software lead." Price target: $530.

Susquehanna's Jeff Fidacaro: "What was missing? The refreshed iPhone did not have a larger screen (same 3.5-inch Retina display) or NFC capability for mobile payments, which we believe simply could have been a factor of the nascent status of mobile payment infrastructure and standards. There were also some expectations for a prepaid iPhone, although continuing production of iPhone 3GS was a surprise to us. Apple did not announce a carrier agreement with either China Telecom (as we anticipated) or China Mobile. In addition, we noticed that China was not part of the first or second big tranches of country rollouts. Rating: Positive. Price target: $535.

Sterne Agee's Shaw Wu: "Looks underwhelming, but more than meets the eye... The reality is that iPhone 4S improves on the already top-selling iPhone 4 with a dual-core processor, much better graphics, more powerful camera, longer battery life, 4G speeds, and Siri voice recognition. Not to mention, it comes with iCloud and new iOS 5 software with notable enhancements including iMessage and Find My Friends." Buy. Price target: $500

Merrill Lynch's Scott Craig: "Clockwork-like refinements in SW is key to Apple's success. Apple continues to make refinements to the iOS, which we view as critical for constantly improving the user experience and extend Apple's leadership in the space. In addition to additional details on iOS 5 and iCloud (both available on 10/12), Apple introduced Siri, a voice-activated, artificial intelligence application for the iPhone, which further improves voice-integrated functionalities of the iOS." Buy. Price outlook: $490.

J.P. Morgan's Mark Moskowitz: "We think Siri can be viewed as Apple's initial play into artificial intelligence. The capabilities featured are not equivalent to IBM's Watson, but without too much imagination, Apple's Siri + iCloud appears to have significant headroom in terms of technical capabilities. In essence, the iPhone 4S is much more than just a smart phone -- it really is a personal assistant in your pocket. Once investors dig into Siri, we think its addition will overshadow the lack of full iPhone form factor change." Overweight. $450 (8/25/11).  

Needham's Charlie Wolf: "You've got to hear it to believe it... What's critical to underscore is that this is Siri 1.0. The service will undoubtedly be enhanced with richer capabilities in each iteration of the iPhone. Siri ushers in a brave new world. The iPhone will morph into an intelligent assistant from what was before a fairly dumb phone even though it was dubbed a smartphone." Buy. $540. 

Morgan Keegan's Tavis McCourt: "Don't underestimate the 4S or Siri. Although investors were clearly somewhat disappointed with no iPhone 5 announcement, we expect the 4S will be very successful, and an LTE-based iPhone 5 will be wildly successful in 2012 when Apple will likely be more in need of a growth driver in a weaker economy." Price target $517 (down from $544 "to account for the recent recession swoon"). 

William Blair's Anil Doradia: "From our perspective, the release of the next iPhone version was largely in line with expectations in terms of features, pricing, and availability. While some might view today's announcement as falling short of expectations due to the lack of a new form factor, we are confident the company will meet or exceed our estimates (20 million units for the September quarter and 90 million units for fiscal 2012)." Outperform.

Cross Research's Shannon Cross: "While investors may be disappointed that there is no change to form factor, we believe this launch positions Apple very well into the holiday season and are encouraged by the multi-price points for the iPhones. We think the expanded iPhone lineup should be accretive to Apple's margins and units while requiring others to stretch on BOM and features in order to differentiate. In addition, the rapid rollout (100 carriers by year-end 2011, multi-carriers in Japan and adding Sprint) should drive upside to units." Reiterate Buy and $500 price target. 

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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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