Wednesday, December 30, 2009

Apple Stock Expected to Rise in '10

(Bloomberg) — Apple Inc. (AAPL) shares may advance next year after reaching a record yesterday as the maker of the iPhone and Macintosh computer sells more handsets and introduces new products, analysts said.

"Apple remains the best technology company on the planet," Brian Marshall, an analyst at Broadpoint AmTech Inc. in San Francisco, said yesterday in a report. Marshall expects Apple's stock to gain 23 percent to $260 in the next year and recommends buying it. "Its business model is becoming stronger over time."

Software downloads for Apple's devices grew 51 percent in December from the previous month, according to research firm Flurry Inc. That signals that sales of the iPhone and iPod Touch jumped during the holiday season. Analysts and investors expect Apple to add a tablet computer to its lineup next year, providing a fresh source of revenue.

Apple rose to a record $211.61 on the Nasdaq Stock Market yesterday and fell $2.51 to $209.10 at 4 p.m. New York time today. The shares have more than doubled this year, compared with a 61 percent rise for the Standard & Poor's Information Technology Index. The average price estimate for the stock is $242.44, according to a Bloomberg survey of 32 analysts.

Apple, based in Cupertino, California, offers more than 100,000 applications on its iTunes online store, giving its phones and media players an edge over rivals. Google Inc. (GOOG), whose Android operating system runs phones made by Motorola Inc. (MOT) and HTC Corp., has about 12,000 applications.

'Flooded the Market'

"Apple downloads continue to grow at staggering rates," said Peter Farago, a spokesman for San Francisco-based Flurry. "IPod Touch devices must have flooded the market over Christmas."

The 51 percent increase in downloads compares with 22 percent for Android, Flurry said. Downloads for the iPod Touch—a device that offers many of the iPhone's features without the phone—soared more than 1,000 percent on Christmas Day, compared with previous Fridays in December.

The download volume for Apple is more than 13 times larger than for Android, according to Flurry data. Android application downloads increased 93 percent on Christmas Day.

Google, based in Mountain View, California, fell $3.47 to $619.40 on the Nasdaq. The shares have doubled in value this year.

The iPhone still has less than 1 percent of the total global market, giving it plenty of room to grow, Marshall said.

'In Its Infancy'

"Despite the enormous success of the iPhone since inception in July '07, we strongly believe the device is still in its infancy," he said in the report.

Apple could release an oversized iPod Touch as a tablet computer, according to Maynard Um, an analyst at UBS AG in New York. Or the tablet may take the form of a scaled-down notebook computer, he said.

The biggest challenge for Apple will be keeping the momentum going next year, said Shannon Cross, an analyst at Cross Research in Livingston, New Jersey. The economy is still weak and Apple's products are more expensive than those of its competitors, she said. Still, Cross expects Apple to do well.

"We expect expansion to additional carriers for the iPhone, most notably Verizon in the U.S., and then there's the tablet which appears to be coming shortly," said Cross, who has a "buy" rating on the stock and expects it to reach $290 in the next year. "It's a very good time for Apple. It's a very well-positioned company."

The company trounced analysts' estimates for profit and revenue last quarter. Fourth-quarter net income rose 47 percent to $1.67 billion, or $1.82 a share. Sales advanced 25 percent to $9.87 billion in the period, which ended Sept. 26. Analysts surveyed by Bloomberg had predicted revenue of $9.22 billion and profit of $1.43 a share.

Marshall projects sales of $12.5 billion and earnings of $2.27 a share this quarter. That's higher than the average estimates of $11.9 billion for revenue and $2.04 for profit.