JP Morgan: iPhone, iPad to push Apple stock to $390 by Dec. 2011

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"Buckle up," was the advice issued Thursday to Apple investors by J.P. Morgan, as the firm expects Apple's stock to soar to new heights in the next year and a half based on rapid growth of both the iPhone and iPad.

Apple was added to J.P. Morgan's Analyst Focus List, and increased the price target for the "overweight" stock to $390 by December of 2011. Analyst Mark Moskowitz said it is the growth of the iPhone and iPad, combined with untapped international opportunities for the Mac, that will send Apple's stock soaring to new heights.

"We do not expect our latest round of upward revisions to be the last," he wrote. "Overall, our estimate revisions point to top and bottom-line growth far exceeding 20% over the next two years, which we think requires a re-rating of the stock's valuation principles."

For starters, Moskowitz believes the iPhone 4 will finally push Apple past the 10-million-per-quarter threshold. He believes Apple will eclipse that number in shipments for the iPhone in September 2010. Previously, it was expected to reach that milestone in March 2011.

For comparison, last quarter Apple sold 8.75 million iPhones, representing its best quarter ever for handset sales.

The numbers don't even include the prospect of a Verizon-compatible CDMA iPhone, rumors of which have picked up again this week, following a new report from Bloomberg claiming the device will arrive in January 2011. Moskowitz said conversations with industry contacts have indicated that a Verizon iPhone could launch next year at the earliest, but J.P. Morgan has opted to take a "conservative view."

"For Verizon, we think the issue is still over the subsidy," he said. "If that is not the issue, it could be that Verizon wants to build out its 4G LTE network, which is still in the early stages. On this topic, we do not expect the major 28 cities in the U.S. to have full LTE capability with Verizon until mid-2011."

And iPad sales are "just getting started," the analyst believes, with "iPad mania" set to intensify during the back-to-school and holiday seasons. Previously, the firm did not expect the iPad to catch on with consumers until future models added more features. J.P. Morgan now believes Apple will sell 3.8 million iPads in the June quarter, and 21.5 million in Apple's 2011 fiscal year.

"We expect the iPad to be a top selling item in both the back-to-school and holiday seasons," he said. ""There will be competitive entries introduced in coming quarters, but we do not expect there to be much disruption. Similar to the iPhone, the iPad reflects Apple's ability to introduce unrivaled technology experiences for the consumer."

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Finally, Moskowitz said that the Mac could have some "near-term bumps," with hype over the iPad having some impact on sales. J.P. Morgan has lowered its forecast for Mac sales in the current quarter to 3.05 million, down from 3.11 million. For fiscal 2011, totals were also lowered from 15.95 million to 15.59 million.

But the analyst said Apple still has great potential to grow the Mac overseas. Moskowitz said he believes in a matter of years, Apple should be able to increase its international market penetration. Even if Apple reaches a global market share just half of what it has in the U.S., the revenue opportunity is in the billions of dollars.