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Wall Street analysts weigh in on the iPad mini
Although Apple's stock fell sharply after the event yesterday -- it closed at around US$613 after opening the day at about $631 a share -- most Wall Street analysts are saying that the iPad mini will be a hit with consumers. The $329 starting price of the iPad mini was seen by Chris Whitmore of Deutsche Bank as a "modest disappointment," although he said that the features of the mini more than make up for the higher-than-expected price point. Many analysts, including Whitmore, believed Apple would offer a base model with only 8 GB of storage and were surprised by the starting capacity of 16 GB. Whitmore also feels that the build quality of the aluminum unibody iPad mini will also justify the $130 price premium over Android competitors such as the Google Nexus 7 and Amazon Kindle Fire HD. The competing devices are made of plastic and glass. Deutsche Bank is maintaining its $850 price target for AAPL shares. Also chiming in was Charlie Wolf of Needham & Company, who thinks the new iPad mini will expand the overall market, and make life difficult for lower-priced competitors. To quote Wolf's comments about the competition, "none compare with this device, in our opinion, which is a full-featured iPad except for its size. All 275,000 iPad applications can run on it without modification." Needham's price target of $750 for AAPL remains the same. Sterne Agee's Shaw Wu had predicted a price point for the iPad mini between $299 and $349, so the $329 price tag fit his expectations. Wu was quoted as saying, "We continue to believe iPad mini is the competition's worst nightmare and likely to drive incremental volume." AppleInsider has a full rundown of analyst reactions to the littlest iPad. One parting comment from their post notes that "Maynard Um of Wells Fargo Securities believes that Apple arguably has its strongest product lineup in the company's history."
Apple retail stores still crowded at 8400 average square feet
When the first Apple Store opened 11 years ago, Apple felt that 6,000-square-foot stores were the perfect size. Apple's fiscal 2011 10-K report showed that the average size of an Apple Store has creeped up to 8,400 square feet per store, but Needham & Company analyst Charlie Wolf says that the retail stores are "bulging at the seams" and just aren't big enough. As reported by AppleInsider, Wolf says that the number of visitors per store has grown at a 15.3 percent annual rate. Apple is responding by moving some stores to larger locations. In New York City's SoHo neighborhood, for example, Apple is expanding its store -- requiring a US$1.4 million investment in a temporary store to serve customers during construction. The same thing is happening on the West Coast. Apple's Palo Alto store is being replaced by a new 15,030-square-foot "prototype" store that may serve to test new store designs. That store is literally within spitting distance of the original store. Megastores are also being built in a number of locations. The 30,000-square-foot store in London's Covent Garden, the 16,000-square-foot Pudong store in Shanghai, and the 20,000-square-foot Grand Central Terminal store in New York City are all examples of these flagship facilities that are designed to handle the huge crowds that gather to daily buy Apple gear.
Needham & Co. raises price target for AAPL
The stock market has been tanking all week, but that's not keeping financial firm Needham & Co. from being bullish on Apple. The company raised its price target for AAPL from US$450 to $540. So why the big jump? Needham's Charlie Wolf notes that the firm adjusted how it values Apple's different businesses and product lines. The iPad, for example, is now estimated to contribute about 12.2 percent to the value of Apple stock. That's up from the previous estimate, based on a new assumption that the iPad will continue to capture a larger share of the tablet market that Needham initially thought. The Mac is also adding to the party, thanks in part to a halo effect from the iPad. As more buyers become entranced with the iPad, they're more likely to purchase Macs in the future. The Mac product line is now valued at about 11.8 percent of AAPL's value. Likewise, iTunes has been bumped in importance as a contributing factor to the stock price (now 5.1 percent) thanks to the growth of the App Store. The biggest contributor? The iPhone, which provides almost 49.2 percent of the value of each share of Apple stock or about $266. That's also seen as a risk factor, since even a small decrease in growth of iPhone sales could have a huge impact on Apple stock price. Last but not least, Apple's cash hoard adds to the stock price value, contributing about 14.8 percent of the value. However you look at Apple, the company's performance in troubled financial times has so far been nothing less than stellar.
iPhone could be the financial survivor in Android and Windows Phone 7 war
Needham & Company analyst Charlie Wolf believes that the iPhone could emerge as the big survivor as Android and Windows Phone 7 battle it out in a race to the bottom. Wolf expects that Google and Microsoft will be battling aggressively to keep phone makers building devices with their respective software platforms and those manufacturers will probably slash prices in an attempt to get market share. The result is expected to be significantly decreased margins for everyone but Apple. This could mean a scenario similar to the computer market where commodity Windows computers hold the vast majority of the market, Apple uses its highly polished products to stay far and away the most profitable computer maker. In a new research note to investors, Wolf declared that the launch of Microsoft's new phone OS has been successful despite what appears to be very slow sales after less than two months on the market. According to Wolf there were 135,000 active users of the Windows Phone 7 Facebook app, which he sees an indicator of sales in the absence of actual numbers from Microsoft. Wolf expects the Windows numbers to grow as a result of Microsoft spending a substantial amount of its $500 million phone marketing budget on keeping phone manufacturers and developers in the fold. While Android is roaring along with 300,000 activations a day right now, it is expected to take a hit if and when the iPhone arrives on Verizon's network. However, what Wolf doesn't really address is how AT&T will respond to losing Apple exclusivity. It's possible that it will put more of a push behind rival systems, helping them to increase their share at the expense of some profitability for the manufacturers and OS developers.
