Photo: Morgan Stanley
Apple’s stock, which currently trades around $259, could soar to $400 by the end of next year, writes Katy Huberty at Morgan Stanley.Katy says to bank on growth in iPad and iPhone sales. (Particularly, the latter.)
We’ve read through a report Katy put out today and pulled out the 11 charts that best make her case.
1.) Apple's stock soars to $400 in a bull case if Apple adds Verizon and other carriers. Further, Apple ships 12 million iPads and 73 million iPhones in 2011. Gross margins reach 40% and EPS is $20.
2.) Apple's stock hits $310 in a base case with iPhone shipments of 42 million in 2010 and 61.5 million in 2011. 6 Million iPads in 2010 and 9 million in 2011. Mac sales are 14.1 million in 2010, 16.3 million in 2011. EPS is $14.50 in 2010 and $17.25 in 2011.
3.) Apple's stock tanks in a bear case if the iPhone or iPad are well below the above estimates.
Put aside the competition between Google and Apple. Apple still has a lot of room for growth in the U.S.
In her note, Katy raises her 2011 iPhone forecast to 61.5 million units. That's 25% above consensus and up 46% from her 2010 expectation of 42 million units sold.
In a bull case, Katy argues Apple could sell 73 million units in 2011, and have an EPS of $20. Though, to hit that target, Apple must be on Verizon early in 2011, half of iPhone owners will have to upgrade and buy the next model, and there must be real cost reduction in the price of the iPhone.
This chart shows people's shifting perceptions about buying an iPhone. The expensive monthly plan is the biggest barrier for people wanting an iPhone. Though, high device cost is a problem. (This is an opportunity for Android.)
Katy expects Apple to lower the price of the iPhone 3GS to $99 this summer. Lower prices should increase sales, though Apple has already had the iPhone 3G for $99 in the past year.
Katy notes that a lower service plan would drive more iPhone sales. We don't see it happening. The telecos can't (or won't) afford lower monthly plans.
China remains a big a opportunity for Apple. One way to grow the market? Offer more affordable, pre-paid iPhones and Katy thinks unit sales soar. It's unclear if Apple would actually do that.
Apple will grow as corporations adopt iPhones. iPhone Enterprise penetration is 45% and Katy says CIOs plan to increase spending on the iPhone more than any other platform.
Katy doesn't know when the iPhone comes to Verizon. If it comes in early 2011, that's much more positive for Apple. According to her research, 17% of Verizon customers would buy an iPhone if it was on Verizon. That equates to 7-8 million million units annually for Apple on Verizon.