Wells Fargo Reiterates Outperform on Apple on Distribution/Authentec Opportunity
In a report published Wednesday, Wells Fargo Securities analyst Maynard Um reiterated an Outperform rating on Apple (NASDAQ: AAPL).
In the report, Wells Fargo Securities noted, “We understand that Apple is becoming less rigid with operators, which we see as paramount to further carrier penetration (279 vs. 650 peak at BlackBerry). Further operator/distribution expansion should help drive unit growth – if Apple is able to increase its carriers by 100 (similar to BlackBerry's historical annual pace), we est it could add an incremental 31.5MM iPhones to FY2014 with every 5MM units equating to $1.04/share in EPS (not assuming an increase in units/carrier as BlackBerry saw). Additionally, we believe investors may be underappreciating Apple's Authentec acquisition – specifically the ability to perform secure device-side authentication, which could help open up the mCommerce market and further penetrate the enterprise market. We maintain our core thesis that the iPhone 5S cycle should be gross margin accretive and a new mid-tier iPhone should open up market opportunities. While we maintain our ests until there is more clarity on the new iPhone roll out timing (may be staggered across the September and December qtrs), we believe there could be upside, and consequently, raise our range to $525-575 (from $485-525) based on 12- 13x our FY2014 EPS estimate.”
Apple closed on Tuesday at $488.58.
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