Can Apple Reach $600 in 2012?
With price targets as high as $600, many analysts expect Apple to continue to climb. But can the Mac maker go the distance in 2012?
Looking at the presumed (though far from confirmed) product lineup, Apple (NASDAQ: AAPL ) has the iPhone 5, iPad 3, another iPod Touch upgrade, another MacBook Air upgrade, and likely another modification to its Pro line of MacBooks. Those alone are worth billions to Apple. The iPad 3 should prove to be bigger – and sell even faster – than its predecessor, especially if it is given one very significant upgrade .
Then we have the rumored product lineup, which includes a brand-new series of television sets, a significantly revised MacBook Pro that would be as thin as a MacBook Air, and another variation to the iPod Nano. Rumors also insist that there will be two completely different versions of the iPad, but does anyone really believe that? I find it hard to believe that Apple would cannibalize its own market by selling a smaller and cheaper iPad to consumers who might have otherwise been persuaded to spend $500+ on Apple's flagship tablet.
iPad nonsense aside, if the other rumors prove to be true, you can add a few more billion to the company's bottom line.
But even if Apple's profits continue to rise, will they really be enough to raise the company's value to $500 or $600 per share?
Toward the end of 2011, many analysts reaffirmed their belief in Apple's long-term success by initiating or maintaining price targets of no less than $500. This includes Citi ($500 PT), Sterne Agee ($500 PT), Morgan Keegan ($530 PT), Wedbush ($535 PT), Canaccord ($560 PT), and Evercore Partners ($600 PT). Even FBN Securities, which lowered its price target on Apple, still wound up with a PT of $515.
Over the holiday weekend, Global Equities Research sent out an e-mail update regarding its stance on the iPhone maker.
“Mac OS Lion upgrades continues to remain strong, probably up 40% to 50% sequentially, driving up the revenues on Mac App Store,” Global Equities wrote in a report. “Apple iBookstore eBook downloads probably now exceed that of Amazon (NASDAQ: AMZN ) Kindle. Apple iTunes may show a CAGR of ~48% over the next two years.”
Global Equities reiterated its $500 PT and maintained its Overweight rating on the stock while adjusting its FY 2012 revenue estimate from $140.51 billion to $141.31 billion. The research firm also moved its EPS estimate from $34.36 to $34.58.
Why do analysts have so much faith in Apple when there are so many unanswered questions remaining for the year? And why do they think the stock can rise so impressively when it closed out 2011 in the low $400 range?
The proof is in the company's history. From January 3 to December 30, 2011, Apple rose from $329.57 to $405.00. The company achieved a year high of $422.24 on October 18. In the previous year, Apple rose by roughly 50%.
But the share price alone cannot predict a positive future for Apple. Investors don't need to look any further than Netflix (NASDAQ: NFLX ) to understand the danger of investing in a company solely because its stock is on the rise. With Apple, investors are more likely to be buying into the company's record-breaking sales figures . From the iPad 2 shortages to the worldwide launch numbers of the iPhone 4S (which moved four million units in one weekend), Apple continues to make headlines whenever it sells a new product.
The pre-release hype – which is often led by months of rumors before one official headline-stealing announcement – is unlike any other. Month after month, people can't wait to get in line.
“It's Apple, you gotta get it,” one Apple loyalist told Benzinga at the launch of the iPhone 4S .
"It's gonna be faster,” another early adopter anticipated. “The auto enhancements with the photos... It's the same shell, just a few new features, I understand….It's gonna be cool.”
But when it comes to the iPhone, the “shell” isn't what people care about. Siri moved mountains for the 4S, primarily because the original iPhone 4 was already a great phone. For many consumers, Siri made it even better.
So whereas the iPhone 4S sold millions for its content, Apple used the thin, sleek, and lightweight design of the MacBook Air to persuade consumers to drop their clunky laptops for something a bit more elegant. A solid state hard drive provides the compact machine with a superior storage option. The drive may have limitations in terms of long-term readability (the one drawback to solid state drives – AnandTech has a great piece  on the matter), but with no moving parts, it isn't going to fall apart with normal use. The Air also comes in and out of standby at a near-instant. Who can beat that? Not an Intel (NASDAQ: INTC ) ultrabook, that's for sure.
In 2012, Apple might not be able to make the next MacBook Air any smaller. It might not improve the Nano, or release a remodeled iPad. But Apple fans are a diehard bunch. While they might not have bought into the external device called Apple TV, they most certainly will buy into an actual Apple television set. They're already planning to line up for the iPad 3, which might not arrive until late spring (though rumors claim otherwise, promising a winter release as early as this February). And the iPhone 5 – which many assume will be a radically redesigned device – is sure to sell faster than the last iteration.
But even with all of that in mind, Apple may not be able to reach $600 in 2012.
Traders who believe that Apple can reach $600 – or even $500 – in 2012 might want to:
- Go long Apple, obviously.
- Consider AT&T (NYSE: T ), the number-one cellular service in America, and still the largest mobile provider to iPhone customers.
Those who doubt Apple can rise 25% in 2012 may want to consider:
- Microsoft (NASDAQ: MSFT ), whose rumored superphone  could prove to be the worst thing to happen to iOS since Android.
- Google (NASDAQ: GOOG ), whose mobile OS continues to stand tall against Apple.
Follow me @LouisBedigian 
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