“Based on strong sell-through trends during March for both iPhone and iPad and our belief Apple is successfully leveraging its leading market position to secure component supply through the Japanese tragedy, we believe the company will maintain dominant value share of both the tablet and smartphone markets,” Mr. Walkley said. “We maintain our BUY rating with an increased price target of $480 from $460.”
Based on his research, Mr. Walkley said the iPhone 4 was the top selling smartphone for Verizon and AT&T in March. He added “With Verizon not allowing subsidies to customers still under a two-year contract, we anticipate steady upgrades by Verizon customers over the next several quarters and believe the iPhone will remain the top-selling smartphone at Verizon throughout calendar year 2011.”
He is also expecting Apple will break from its historical pattern of updating the iPhone in July and will release new models this year in September. If so, the later than usual launch date would be strategic instead of “poor execution.”
“With the potential to include LTE and NFC technologies, we believe this would give Apple more time to include these new technologies in an iPhone 5,” Mr. Walkley said. “Further a launch closer to the holiday selling season could make sense given the iPad 2’s recent launch and strong demand.”
Looking forward, Mr. Walkley now expects Apple will some 36.5 million iPads by the end of 2011. His EPS for 2011 is down from $22.92 to $22.72 based on lower gross margin assumptions, but is increasing his 2012 EPS estimate from $25.60 to $26.64.
Apple is currently trading at US$344.56, up 0.39 (0.11%).