Charlie Wolf invokes "Diffusion of Innovations" in raising his Apple price target to $540

Photo: University of Nebraska - Lincoln

In Everett Rogers' classic text on how innovations percolate through societies, he describes how hybrid corn, despite 20% higher yield and resistance to drought, took two decades to become ubiquitous in the farms of Iowa. High-tech innovations spread more quickly these days, but they too follow Rogers' S curve, from early adopters to mainstream use to late adopters.

Needham's Charlie Wolf invokes Rogers' treatise in his semiannual reevaluation of Apple (AAPL), issued Friday in a note to clients that announced he was raising his 12-month price target to $540 from $450. The ultimate size of the tablet computer market, and the iPad's share of that market, are key to Wolf's revised valuation because it is based of several new assumptions:

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