Wednesday, January 25, 2012

Wall Street Goes Bonkers Over Apple’s ‘Historic’ $46B First Quarter

If you were concerned that Apple was all out of surprises, Tuesday put that all to rest. The Cupertino, Calif. tech giant surpassed Wall Street expectations and the amateurs, making analysts fall over themselves describing Apple’s first quarter of 2012 results as “historic.”

In one of the more restrained morning-after descriptions of Apple’s $46.3 billion quarter, UBS analyst Maynard Um writes “the magnitude of upside is quite impressive.” On point after point, Apple exceeded Um’s expectations. UBS had expected a $38.5 billion quarter from 30 million iPhones and 12 million iPads. Instead, the company announced $46 billion on 37 million smartphones and 15.4 million iPads.

Piper Jaffray’s Gene Munster writes most of those iPhones sold were upgrades. “Based on our research, we estimate that 70 percent of iPhones sold in the U.S. were upgrades from previous iPhones,” the analyst tells investors. “We believe 30 percent of iPhone sales were from buyers going from iPhone 4 to iPhone 4S.” Additionally, 94 percent of iPhones owners plan to buy another iPhone, he said.

What does the future hold for Apple and its product line? The answers were all positive. Um believes Apple is “firing on all cylinders.” The “iPhone has legs into [the March quarter] as supply/demand remains imbalanced exiting December and continued international rollouts” as in China, he writes.

A “new iPad 3 and iPhone 5 will help maintain sales momentum in 2012 and increasing possibility of cash return could re-rate the stock toward IBM’s” price per share and earnings ration, writes Morgan Stanley’s Katy Huberty.

Barclay’s Ben Reitzes said Apple’s December quarter “was beyond all of our most bullish scenarios, especially for iPhones and iPads.” Reitzes expects Apple will unveil a new line of iPads, the iPhone 5 and new Macs.

But what about the Android threat, which RBC’s Mike Abramsky warned Wednesday could be a risk for 2012? Pshaw, writes BTIG’s Walter Piecyk. “We believe Apple is gaining additional momentum on Android which suffers with a fragmented product portfolio and uneven customer experience.”

Echoing that enthusiasm is Deutsche Bank’s Chris Whitmore who sees Apple’s 2012 product lineup remaining “incredibly strong.” Along with an iPad 3 in early 2012, Whitmore foresees the iPhone 5 in the fall, Macs with Ivy Bridge, Apple TV “set to graduate” from a hobby. He also believes Siri will become the user interface on an iOS device with iCloud syncing redefining smart TVs.


Nearly all analysts are pushing their target price for Apple stock to at least $600 per share. Munster is the most bullish, raising the target price to $670 from $607. Reitzes hikes Apple’s target to $630 from $555, while Whitmore and Piecyk set their target at $600, up from $530 and $580, respectively.

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