By Mark Long / CIO Today. Updated March 15, 2012.
Piper Jaffray boosted its 12-month price target for Apple's shares from $670 to $718 on Thursday, saying that the investment firm had previously not given sufficient credit to the iconic device's maker's strong position for growth in the tablet and smartphone markets. For example, the firm's analysts have boosted their iPad unit shipment growth rate estimate for 2013 from 21 percent to 42 percent.
"We are raising our calendar year 2013 iPad estimates based on our belief that Apple will release a sub-$300 iPad with a smaller display in 2013," Piper Jaffray analysts Gene Munster, Andrew Murphy and Douglas Clinton wrote in a new investor note.
"Our base model assumes Apple will sell 122 million iPads in calendar year 2014 and 176 million iPads in calendar year 2015 as the product line matures with additional form-factors," Munster, Murphy and Clinton explained.
With respect to Apple's coming iPhone 5, Munster, Murphy and Clinton have pushed back their expected iPhone 5 release date from mid-2012 to this year's September-ending quarter.
"We're uncertain whether they will try to retain the annual summer launches or have switched to an annual fall release, but some of our insight into the supply chain suggests fall," Murphy said in an e-mail Thursday. "Also, if they don't have an iOS software event in the Spring -- and wait until WWDC to intro iOS 6 -- then that sort of confirms that they're doing a fall launch."
New Base Model
Looking beyond 2012-2013, Piper Jaffray believes that the coming iPhone 5 will help Apple outperform the firm's prior expectation of 162 million iPhone unit shipments in 2014.
The investment firm's new base model assumes that "Apple will sell 285 million iPhones in calendar year 2014 and 385 million iPhones in calendar year 2015, driven by continued strength in developed markets and share gains in geographies with more prepaid users buying a $200 iPhone," Munster, Murphy and Clinton wrote.
With the release of what Piper Jaffray expects to be a redesigned LTE-capable iPhone 5, the firm's analysts expect Apple to continue its current strategy of addressing prepaid smartphone users by making it possible for carriers to price prior generation iPhone models as low as $200 without a contract.
"Previously, our iPad and iPhone growth rates were well below industry growth rates," Munster, Murphy and Clinton noted. "We are now modeling for iPhone to grow faster than the smartphone market and for iPad to grow faster than our previous model driven by the introduction of lower entry-level prices in calendar year 2013."
Multi-Sourcing High Definition Displays
To keep up with growing iPad and iPhone demand, Apple is broadening its supply chain sources for high-resolution screens. According to IHS iSuppli, Samsung, LG Display (LGD) and Sharp have been working hard to reach mass-volume production to meet demand from the launch of the new iPad.
However, the firm's analysts consider it likely that the first iPad volume shipments featuring the new high-resolution display are only coming from Samsung, which may account in part for the red-hot device's current back-order status.
"Although they are currently shipping displays in small quantities, LGD and Sharp are expected to ramp up volume production of new iPad displays in April," analysts at IHS said Wednesday. The research firm's analysts believe "Apple is likely to begin shipping new iPads with displays from these suppliers in the second quarter."
IHS also expects Apple's iPad to account for 72 percent of NAND flash gigabyte shipments for tablets this year. Given that Apple's iPad is a high-end tablet market offering, it is no surprise that the device contains a larger density of NAND than rival tablet models, noted IHS Memory Analyst Dee Nguyen.
"Because of this, Apple's iPad will continue to drive the growth of NAND sales in the tablet market for the next several years," Nguyen said.