Tags: Apple | Amazon | Choi | iphone

Analyst: Apple a 'Buy,' Will Ward Off Amazon Tablet 'Threat'

Wednesday, 28 Sep 2011 09:40 AM

Apple Inc. got a vote of confidence from Janney Capital Markets analyst Bill Choi, who initiated coverage of the gadget maker with a "Buy" rating and a fair value estimate of $495.

Choi expects Apple to sell 27 percent more iPhones next year, or 107 million units. He cites the expected launch of the iPhone 5 next month and the potential launch of a phone that will work on a high-speed "Long Term Evolution" (LTE) standard next year.

Also adding to the gains will be new carrier agreements, and international expansion. The end of exclusive carriage agreements has opened up the iPhone to millions of new possible buyers. Choi said Apple could spur growth by cutting deals with telecoms operators like Sprint Nextel Corp., which has 52 million subscribers, and China Mobile, with 628 million.

He also expected Apple to continue to retain its dominance in the tablet computer market. He expects iPad sales to grow 42 percent next year to 54 million units. Apple sold 28.7 million of them from April 2010 to June 2011. Analysts at research firm Gartner Inc. expect the iPad to account for three out of four tablet sales this year.

He said Apple continued to have an advantage over other makers, but sees Amazon.com Inc.'s new tablet company posing a "serious competitive threat." Amazon is expected to launch the tablet Wednesday.

Some analysts are concerned that Apple has scaled back orders of the iPad for the fourth quarter. Jefferies analysts on Wednesday said they've heard plans were scaled back, but expect any cuts to be offset by strength in the iPhone.

Choi's fair value estimate is based on a price that is 13 times estimated fiscal 2013 earnings of $38.07, saying shares are still "relatively inexpensive to its growth potential."

Apple shares closed at $399.26 on Tuesday. They've gained 19 percent since June 30, in a quarter where the S&P 500 has dropped almost 9 percent. Apple has overtaken Exxon as the most valuable company in the U.S., with a market capitalization of $370.2 billion compared with the oil giant's $354.5 billion.

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