Yesterday, Morgan Stanley raised Apple, Inc.’s (AAPL:Nasdaq) rating to “overweight.” On the news, Apple’s share price climbed 6.8%.
And today, the rally continued with another 3% gain.
Why is Apple’s share price rallying so hard, and is this move sustainable?
Kathryn Huberty, analyst for Morgan Stanley, said in her assessment that “the market is ‘underestimating iPhone unit demand,’” according to Bloomberg. She estimates that the smartphone market will expand by 3.4% even as other mobile phone sales are expected to fall for the first time since 2001.
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There are even rumors that Apple – due to high demand – could cut prices for the current iPhone model, and an even bigger rumor that the company’s 8-gigabyte iPhone will be priced at $99.
Barron’s Tech Trader Daily reports RBC Capital analyst Mike Abramsky “says that the company could leverage its component and manufacturing efficiencies by offering an 8 GB version of the phone at $99, down from $199 currently. He thinks the result could provide a major lift to unit demand, with 5 million additional iPhones in FY 2009, and 22 million in FY 2010.”
In fact, AT&T (T:NYSE) sold 1.9 million iPhones in its fourth quarter.
Just to give you an idea of how popular the iPhone is, AT&T’s total number of new subscriptions sold was 2.1 million, so the iPhone accounted for more than 90% of its new wireless customers.
And in the total smartphone world, 43% of customers access the Web from an iPhone. That’s in the entire world. And U.S. market data shows 56% of customers are using an iPhone to access the web.
This data seems to support an ongoing rally in Apple’s share price, and the next product in Apple’s line up will take advantage of that 56% market share.
In 2010, the company is expected to release a “media pad” tablet, says Dan Frommer for the Business Insider.
The product will span the difference between the smaller devices, like the iPhone and the iPod, and the more powerful devices, like the MacBook. It is expected to offer better movie and book viewing and Internet access than the smaller devices, “but not powerful enough that it would crush notebook sales,” says Frommer.
But Christian DeHaemer, veteran editor with the Taipan Publishing Group, says the mystic of Apple is waning.
“Apple is a company that has made its living by coming out with one genius idea per decade. But all computer and electronic companies are getting hit in this recession. There are no more killer hardware devices coming down the pipe,” Chris says.
The market has already seen “new” products like Hewelett-Packard’s (HPQ:NYSE) netbook.
Chris suggests that Apple is now overbought.
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