At least four analysts, including Katy Huberty at Morgan Stanley in New York, have increased price targets to $700 or higher in the past two weeks. Apple, based in Cupertino, California, rose 3.8 percent to $589.58 at the close in New York and has gained 46 percent this year.
More are likely to boost targets as they quantify the market share of the new iPad, said Michael Walkley, an analyst at Canaccord Genuity, who raised his target to $710 yesterday. The average price target of 43 analysts surveyed by Bloomberg is $605, which could mean updates are lagging behind, he said.
“As they do their checks in the quarter and stronger numbers come through, it leads to better earnings power than we were seeing even six weeks ago,” Walkley said in an interview. “Some analysts are behind the curve on estimates.”
Shares of some Apple competitors have languished as the company takes market share. Hewlett-Packard Co. (HPQ), which has tried competing with Apple through smartphones, tablets and personal computers, has tumbled 41 percent in the past 12 months. Nokia Oyj has fallen 40 percent. Research In Motion Ltd., the maker of BlackBerry smartphones, has dropped 79 percent.
As of today, Apple gave investors a 555 percent return in the past five years and has outperformed the Standard & Poor’s 500 Index by 543 percent. Since 2007, investors paid an average 43 percent premium for Apple’s earnings compared with the S&P 500’s earnings.
The new iPad, set to go on sale March 16, has been upgraded with a sharper screen and faster chip as Apple Chief Executive Officer Tim Cook seeks to widen the company’s lead in tablets over Amazon.com Inc. (AMZN), Microsoft Corp. and Google Inc. (GOOG) Slashing the price of the older iPad by $100 also helps cut into competition, said Huberty, who raised her price target to $720 yesterday.
Huberty also cited the company’s expansion in emerging markets such as China and Brazil and a new TV product as reasons to lift her price target.
“Apple’s earnings power is potentially far greater than investors believe and our prior bull case model suggested,” Huberty said in a note to investors.
To contact the reporter on this story: Sarah Frier in New York at firstname.lastname@example.org
To contact the editor responsible for this story: Tom Giles at email@example.com