Morgan Stanley Upgrades Apple to King of Mobile Internet
by John Paczkowski
Posted on May 26, 2009 at 9:11 AM PT
Apple has $29 billion in cash, no debt, a 36 percent gross margin, and it’s on the cusp of another iPhone ugrade cycle. Little wonder, then, that analysts are raising their target prices on the company’s stock.
Among those doing so today: Morgan Stanley’s Kathryn Huberty, who lifted hers to $180 from $105, arguing that iPhone demand through 2010 is being underestimated by the market and will help drive Apple’s stock value up. “We believe Apple is emerging as the clear leader in the battle over the mobile Internet,” Huberty wrote in a research note to clients, adding that some future pricing adjustments will only solidify that position. “We expect a price cut to the current generation iPhone to drive 50 percent to 100 percent (two million to four million units) incremental unit demand,” she said. “Our survey data suggests 15 percent plus of the iPhone installed base typically upgrade to a new phone.”
A bullish call, especially for Huberty, whose opinion of Apple has historically been mercurial at best. Shares of Apple (AAPL) rose five percent to $128.60 in early trading this morning.
Tempering Huberty’s exuberant pronouncements today is Global Equities Research analyst Trip Chowdhry, who tells Reuters that the iPhone will suffer a bit at the hands of the Palm (PALM) Pre, which is scheduled to arrive at market on June 6. “Investors should not think the upcoming version of iPhone 3 is going to be as successful as iPhone 2.0 because it will have solid competition from Palm Pre, developed by ex-Apple designer Jon Rubinstein,” Chowdhry said. “Palm Pre has a superior operating system than iPhone. It runs on a better network–Sprint CDMA-versus iPhone which runs on GSM.”
Comments
Not sure what Chowdry is smoking, but the Pre OS isn’t out yet. It’s based on developing applications that are web-based, no? Isn’t that what people raked Apple over the coals for before they released the SDK?
The OS on the iPhone is Mac OS X. It has a long history, great graphics, and is very popular. Not to mention developing apps for the iPhone will be easier than any other phone.
John Rubenstein, the guy who wanted a manual keyboard on the iPhone and lost. Yeah, that’s something that will appeal to a lot of people. But it’s way too “pre” release to argue that it’s going to give Apple solid competition.
Palm is taking Apple’s tactics to heart, trying to stir up all sorts of publicity long before release. And they seem to be planning a carefully orchestrated shortages of phones. Best Buys are only going to have five per store for the first month? Yeah, that’ll go over well.
Lastly, CDMA? That’s better?
Right, if you don’t care about engineers not knowing all of CDMA’s flaws, or the fact it’s not mature as GSM, or worst of all, not offering international roaming. iPhone FTW.
Posted by Eric Welch at May 26th, 2009 at 9:33 amIn Africa they have many chiefs and in most parts of the littoral states of the Middle East they have many Sheiks, most of which are puppets of higher orders. In the wireless world there are many kings, of which the iPhone is one, however a new and stronger king has emerged to challenge the domain of its elders and he has come with more cunning and guidance from wisemen that made the current king, the iPhone. Jon Rubenstein was instrumental in making the iPod a ubiquitous device and played a major role in developing the iPhone. This Jedi, with his team of engineers has now turned his attention to resusitating Palm to challenge the very empire he helped create with Steven Jobs. The only problem with Apple is that its leader is weak and fragile, however his acolyte is healthy and beaming with energy. I rather have my money on an a General that has a proven history of success and that I know will survive the war that has just begun.
Posted by darius arya at May 26th, 2009 at 10:09 amCan you tell me why the Pentagon uses CDMA if it is inferior? Are you telling us that our military has opted for an inferior platform to our European counter parts? The truth of the matter is CDMA is a better platform than GSM or TDMA and that is why most of North America is CDMA compatible. VZ the largest US wireless carrier and Sprint the third largest carrier both use CDMA.
On another note regarding international roaming. One is far better off using a local Pre-paid carrier when he/she travels because roaming costs are exhorbitant. Most Americans travel far more to Canada and Mexico than they do to Europe on a regular bassis, hence your argument is weak about roaming.
Posted by darius arya at May 26th, 2009 at 10:28 am$180 from $105? Shouldn’t the question be how she had such bearish opinions of AAPL in the first place, and what has changed between her last downgrade and this upgrade?
Specifically, she downgraded the stock back in September when it was sitting at $128.24 purely as a “the sky is falling” call. All of the iPhone specific macro factors that make her bullish now were in place then.
Now it’s a great buy, due to grow 70% from her previous target of $105?
I guess the data that she chose to ignore in September is now worth factoring in late May?
Honestly, other than providing kindling wood for short-term momentum plays, I am not sure what purpose most analysts serve.
They certainly aren’t held accountable for being right or even well-reasoned in their analysis.
For a more reasoned view of Apple’s prospects, check out:
Apple Earnings: Why NO news is Good News
http://bit.ly/2DmNZ
Regards,
Mark
Posted by Mark Sigal at May 26th, 2009 at 10:36 amWhen considering the opinion of an analyst, one should look first look at their record,then their experience and finally their ulterior motives. I still believe the vast majority are a bunch of idiots regardless of there titles. All you need to do is look at their records and compare it with a chimp randomly choosing a stock on the S&P 500 and the results will manifest who these anal-sts truly are.
Posted by darius arya at May 26th, 2009 at 11:20 amCDMA is proprietary and you have to custom build phones for it, you can’t just use the regular GSM models. CDMA locks you to one network such as Verizon or Sprint, you can’t travel to Europe and use other carriers like you can with GSM. CDMA cannot make a phone call and access Internet data at the same time like GSM can (e.g. surf the Web while on hold, or look up a movie time while talking to a friend about seeing a movie.) Especially when CDMA is at the end of its life right now it is bizarre to argue for it.
> darius arya
Everything you said was wrong.
Posted by Fred Hamranhansenhansen at September 16th, 2009 at 6:11 pm