Edible Apple

With Apple set to report earnings next week, and the stock now back to previous above $600 trading levels, Godman Sachs analyst Bill Shope today issued an extremely bullish research note on Apple, advising investors to stock up on Apple shares in the weeks ahead.

On the absurd notion, from a boneheaded analyst, that carrier subsidies for the iPhone are on the wane, Shope notes that these concerns are overblown.

While some carriers will attempt to reduce the subsidy burden and tighten upgrade policies, many more will likely hold steady to capture share from the latter camp. In the end, all carriers are attempting to migrate their installed bases from feature phones to data-centric smartphones, and amid this transition, we think the risk of losing market share in the iPhone sub-segment is likely to be too great to ignore. On a shorter-term basis, we believe the building rhetoric for lower subsidies and tighter upgrade policies is likely to fade to a whimper, as vendors prepare their marketing strategies for the iPhone 5 refresh later this year.

The iPhone is the Michael Jordan of smartphones. Hell, even Sprint CEO Dan Hesse said as much a few months back. In short, the iPhone is the sole device that attracts users to new carriers in droves. iPhone subsidies are so high because carriers see a healthy return on investment.

Regarding the annual concern that the June quarter will be slower on account of no new products, Shope adds:

We believe recent investor concerns over a ‘catalyst-light’ June quarter are misguided, since this will be the first full quarter with a refreshed iPad, a lower-priced iPad 2, and a fully ramped iPhone distribution channel; in other words, the June quarter is when many of the recent catalysts begin to fully manifest into earnings power.

Also, remember that there are reports Apple may release a 7.85-inch mini iPad sometime during the third quarter of 2012.

And as for Mac sales, which some analysts believe will come in below initial estimates, Shope agrees. However, he writes that stronger than expected international sales may balance out weaker than expected domestic sales.

All told, Shope put a $750 price target on Apple shares, up from a previous target of $700.

via Business Insider