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Wall Street responds favorably to Apple's WWDC announcements


While the iPhone 3G S was generally in line with expectations, lowered Mac notebook and iPhone 3G pricing, combined with favorable upgrade pricing for Snow Leopard, made a positive impression on most Wall Street analysts, many of which issued positive reactions Tuesday while increasing their Apple price targets.

Piper Jaffray: Buy ($180)

Gene Munster maintained a Buy rating with an unchanged share price target of $180 based on the Mac product line price reductions at WWDC that increase confidence in future sales, and pricing on the iPhone 3G coming in more aggressively than expected.

Munster notes that, historically, a “50% cut in iPhone pricing has increased unit demand by 2x" resulting in an increase in their iPhone sales estimates over the next 3 quarters. Regarding the Mac product price reductions, Munster was “surprised by Apple's aggressive reductions" but is “increasingly confident" in estimating near-term Mac sales.

Kaufman Brothers: Buy ($176)

Shaw Wu at Kaufman Brothers raised his 12-month price target to $176 from $160, praising Apple’s move to “hand over the baton to the next generation of leaders."

Based on the pressure the new iPhone 3G S should place on competitors, along with lower-cost portable Macs and aggressive Snow Leopard pricing, Wu believes “Apple is positioned to outperform in this tough macroeconomic environment with its defensible strategic and structural advantages with its vertically integrated model."

Oppenheimer: Outperform ($160)

Oppenheimer’s Yair Reiner maintains his Outperform rating with a target share price of $160.

Regarding Apple’s WWDC announcements, Yair concludes, “Overall, the update strikes us as fairly remarkable in its breadth, if not depth. Skeptics may worry that the new price cuts will pressure margins. We believe they are more likely to lead to stronger demand (because of elasticity) and improved high-end product mix."

Barclay’s Capital: 1-Overweight ($173)

Barclay’s Ben Reitzes reiterates his Overweight rating of Apple shares while raising his share price estimate to $173 from $155.

Reitzes says, “Apple remains our top pick given its new products & prospects for strong free cash flow" and “new products will stimulate incremental demand," prompting him to raise his share price estimate accordingly.

Needham & Company: Strong Buy ($200)

Needham & Company’s Charlie Wolf maintains a Strong Buy recommendation with a price target of $200, citing the iPhone 3.0 firmware and App Store as key drivers behind his recommendation.

On the Mac side, Wolf notes that Apple has “added to its market share since the beginning of the year" despite the “lousy" economic conditions. The App Store’s success and upcoming 3.0 firmware are most impressive and represent “the key upside in Apple story that should propel the company’s share price toward our $200 price target over the coming year."

Caris & Company: Buy ($170)

Claris & Company’s Robert Chira raised his stock price target to $170 from $150 with a Buy recommendation, counting on recent product refreshes and price cuts across its iPhone, MacBook, and OS X lines.

The new iPhone 3G S and remaining 3G 8GB model priced at $99, along with the upcoming 3.0 firmware with additional features support growth in Apple’s share of the smartphone market and the overall cell phone market. Chira states that “We continue to see Apple’s iPhone shaking up the entire billion-unit cell phone industry by shifting competition to Software vs. Hardware... and its critical App Store leveraging a new direct closed-loop relationship with end customers for 1) distribution and 2) billing... that carriers historically fought to never cede."

Relative to Mac product lines and OS X, Chira sees “Apple competing on a plane other than just price, with cuts enough to continue driving incremental share gain," despite average selling prices higher than the averages of competitor PC-makers. Faced with native touchscreen support in Windows 7, Chira continues to doubt that Apple will “sit idly by" given “Apple’s own significant in-house capacitive touch-sensing tech/investments."

UBS: Neutral ($130)

Maynard Um at UBS remains neutral on Apple’s 12-month target, maintained at $130, viewing Apple’s announcements out of WWDC as largely as in-line with expectations.

Um points out that the release of the iPhone 3G S included most of the features expected in a next-generation model. The reduced price of the 8GB iPhone 3G at $99 stands out and “should help stimulate some demand" although “Apple’s subsidy from operators likely remains unchanged, which would likely impact margins."

Snow Leopard’s low price of $29 causes Um to not expect “any material margin benefit" while the updated MacBook and MacBook Pro lines have no impact on his outlook.

Citigroup: Buy/High Risk ($152)

Citigroup’s Richard Gardner maintains a Buy/High Risk rating of Apple shares, maintaining a share price target of $152.

Like some other analysts, Gardner viewed WWDC announcements to align with expectations, though the “biggest surprise from yesterday’s announcements was price cuts across the Aluminum MacBoo notebook line." Though he believes that Apple’s “gross margin achieved a medium-term peak" in the first quarter of 2009, he believes that “Apple remains one of the best ways to play the ongoing digitization of all entertainment content (music, photos and video) because of the company's superior software for managing, editing, and sharing this content."

RBC Capital Markets: Outperform ($165)

Mike Abramsky of RBC reiterated his Outperform rating with a target share price of $165.

Based on a number of factors, including continued innovation in Macs, iPods, iPhones, above-peer margins, growing iPhone global handset share gains, Apple's "VIP" (Valuation Innovation Premium), and Steve Jobs' ongoing involvement in Apple, Abramsky sees Apple attacking “the mass market, expanding iPhone/Mac appeal via innovations and compelling pricing" to merit the Outperform rating.

Morgan Stanley: Overweight ($180)

Morgan Stanley’s Kathryn Huberty maintains her Outperform rating with a share price target of $180.

Although announcements out of WWDC were mostly as expected, Huberty notes that the combination of an earlier ship date and larger price cut for the iPhone and broad Macbook price cuts do present upward pressure" to near-term estimates. In particular, the lowered 8GB iPhone price and new iPhone 3G S should increase demand, with “increasing iPhone build rates in the next few months to provide the next catalyst for AAPL shares."