Apple: Boring or Not, iPhone 5 Drives to Shares to New Heights - Barron's (blog)

By Tiernan Ray

Apple (AAPL) shares received a raft of price target increases this morning following the company’s unveiling yesterday of the latest version of the iPhone, the iPhone 5, and updates to its iPod “Nano” and iPod “Touch.”

The shares today closed up $13.19, or almost 2%, at $682.98 after hitting a new all-time high of $685.50, no doubt helped as well by the general euphoria over the Fed Reserve’s disclosure it intends to pursue a third round of quantitative easing.

The coverage in the media was mostly positive if not entirely glowing. David Pogue with The New York Times wrote yesterday that “Overall, though, Apple seems to have put its focus on the important things you want in an app phone: size, shape, materials, sound quality, camera quality and speed (both operational and Internet data), and that’s good.” Engadget’s Darren Murph wrote of the modified industrial design, “In typical Apple fashion, even the finest details have been worked over tirelessly. The metal feels downright elegant to the touch, and the same line we’ve said time and time again applies here.” USA Today’s Ed Baig writes that “the new iPhone looks awfully inviting from my vantage point” as a user of an iPhone 4 grown stale.

But The Wall Street Journal’s Jessica Vascellaro wrote in today’s paper that the iPhone risks being boring by leaving out features in other phones, such as substantially larger displays. She cites the comments of one anonymous employee at Apple who wishes the iPhone 5 had included more things such as “near-field communications” for making wireless payments, or wireless charging.

Toni Sacconaghi, Bernstein Research: Reiterates an Outpeform rating and raises his price target to $800 from $750 after raising this quarter’s iPhone shipment estimate to 28 million from 22 million. “By December, Apple expects the iPhone 5 to be available in 100 countries at 240 carriers -essentially global distribution.The iPhone 5 will have a faster and wider rollout than previous iPhones, with nine countries at launch compared to seven for the iPhone 4S and five for the iPhone 4 [...] The launch of the iPhone 5 and rapid rollout appears to fullyexplain Apple’s seemingly aggressive FQ412 revenue guidance in July. We now believe that Apple can sell ~13M new iPhone 5′s by the end of this quarter (including some potential channel inventory build) and that Apple might sell only 15M older generationdevices in the quarter. Our FY13 iPhone unit growth estimate remains at 30%, though is sensitive to the timing of carrier additions, notably China Mobile.”

Shebly Seyrafi, FBN Securities: Reiterates an Outperform rating and raises his price target to $1,000 from $800, after raising his iPhone unit estimate this quarter to 29 million units from 24 million, and calling the iPhone 5 tech specs “nice.” “Yesterday, AAPL made its long-awaited announcement of the iPhone 5 which largely met expectations. With shipments starting on September 21, we model 5M iPhone 5 units shipped this quarter, and see upside here.”

William Power, R.W. Baird: Reiterates an Outperform rating and a raises his price target to $750 from $740 after raising his iPhone sales estimate this quarter from 21.2 million units to 24.4 million, and raising his EPS estimate for the quarter from $8.05 to $9.01. “Though no significant surprises, we view most of the changes as solid improvements, and continue to expect strong sales. We are raising our calendar Q3 iPhone shipment estimate to reflect 10 days of availability and likewise are lowering our Q3 EPS estimates for T , VZ and S to reflect higher subsidy losses.” Power expresses a separate concern, which is that the pricing of the new iPod Touch, staring at $300, calls into question whether Apple will come up with a smaller iPad that is competitive on price with devices such as Amazon.com‘s (AMZN) Kindle Fire Tablet, and Google’s (GOOG) “Nexus 7,” both of which start at $199.

Not everyone raised targets, despite mostly having very nice things to say about the iPhone, and there were a few folks who remarked that the new model lacks “surprises” and the “wow” factor:

Alex Guana, JMP Securities: Reiterates a Market Perform rating, “following a launch event for the iPhone 5 that held few if any real surprises relative to the most widely circulated speculation coming into the event [...] The newest addition to the iPhone lineage is an attractive and worthy successor that is likely to once again sell exceptionally well this holiday season; however, in meeting rather than exceeding most of the expectations from the investment and trade communities coming into the event, and in merely matching most of the key specifications already being fielded by the competition, we see the event proving largely neutral to prospects for the stock and our earnings expectations.”

Katy Huberty, Morgan Stanley: Reiterates an Overweight rating and a $720 price target. “We are surprised by the conservative near-term investor expectations, which is a good thing for the stock. We believe the hardware improvements (display, form factor and LTE) are significant and will drive a strong product cycle. Our analysis of past iPhone cycles vs. the installed base points to 211M iPhones in CY13 even at the low-end of the range and 266M at the high-end, versus consensus of mid-160M and our base case estimate of 180M (see right chart).”

Aaron Rakers, Stifel Nicolaus: Reiterates a Buy rating and an $825 price target. “Overall, today’s hardware upgrade and iOS 6 software upgrade (previewed in June) meets our expectations and leaves Apple well positioned competitively against the oncoming wave of Android smartphones entering the market over the next quarter.”

Brian Blair, Wedge Partners: Reiterates a Buy rating. “While the iPhone 5 hardware showed up largely as expected (due to Internet leaks), the phone still surprises once in the hand with a much lighter weight than expected, and an ultra slim profile that makes the 4/4S look bulky in comparison. The phone is an elegant evolution of the iPhone lineup with the primary difference being a screen that is stretched upward, while maintaining its familiar width. The hardware housing and construction is the most precise we have seen in any hardware from Apple or anyone else, with nearly invisible seams and machine tooling of the casing that gives a mirror-like finish to the edges. Overall, the phone is similar to the iPhone 4/4S, but the new details give it a bit of a wow factor. This phone will sell very well.”

Brian White, Topeka Capital Markets: Reiterates a Buy rating and an $1,111 price target, noting that the iPhone 5′s procession to market will be the fastest ever for an iPhone. “Last year with the iPhone 4S, Apple focused primarily on improving the internals of the iPhone and this year the Company put great effort into both external aesthetics and internal functionality. As such, we believe the demand for the iPhone 5 will be unprecedented and will no doubt be the largest upgrade cycle ever for a consumer electronics product. Smartphone competitors should be concerned about the impact of the iPhone 5 ramp on their business over the coming months as we believe Apple has the opportunity to gain significant market share.”