After lagging for weeks, Apple
Let's look what's giving Apple bulls courage today.
Pay no attention to this Fool
As much as I'd like to think that my words can move a $500 billion company that trades an average of 24 million shares a day, I doubt that my article over the weekend about how absurdly cheap Apple has become over the past few weeks is the cause.
While Apple's depressed prices and low valuation relative to its earnings power and the broader market may mean shares are locked and loaded, there still needs to be a catalyst for a spark of inspiration.
Good old Gene
Longtime Apple analyst and bull Gene Munster of Piper Jaffray is out with a research note to dispel fears that supply constraints at baseband provider Qualcomm
While Qualcomm is seeing some 28-nanometer supply constraints from contract manufacturer Taiwan Semiconductor Manufacturing, Munster is confident that Apple will be able to lock down the supply that it needs (as usual) and gets "favorable treatment in terms of access to 28-nanometer inventory." Apple is no stranger to having certain scarce components cause manufacturing bottlenecks, such as the Retina Display in the new iPad.
The company has experience managing launches and ramping up production as quickly as possible, so Apple should be relatively insulated from the impact of any shortages that Qualcomm is facing. Munster also believes that even if Apple is faced with shortages, prospective buyers would simply delay purchases instead of defecting to a competing smartphone and those sales would be booked in the following quarter, especially since this year's iPhone will probably be the most meaningful upgrade in years. He added, "We believe the iPhone 5 will represent the biggest consumer electronics product launch of 2012 as well as the biggest device upgrade cycle in smartphone history."
Munster is modeling for 49 million iPhone unit sales in the calendar fourth quarter, and he thinks there's an 80% shot that Apple will hit his target. He also went ahead and reiterated his "overweight" rating and $910 price target, representing 72% upside from Friday's close.
Good old Goldman
Another concern that's been weighing on shareholders is that wireless carriers are simply fed up with forking over juicy subsidies, with margins going out the door along with them. That's one reason Apple's original iPhone partner, AT&T
Goldman Sachs analysts are questioning this fear, saying that carriers are unlikely to make "material changes to retail prices for leading smartphones," considering their focus on growing smartphone subscribers. Analyst Bill Shope wrote, "We continue to believe that reductions in smartphone subsidies are unlikely to significantly impact the Apple model or the longer-term value of the platform."
Even as carriers are creating disincentives to upgrade, such as fees or extended upgrade timeframes, Shope actually sees this trend as benefiting Apple. After all, if consumers are looking at a fixed upgrade fee and they know they'll be using that device for a longer period of time, why not go with the best in breed?
I've always looked at basic game theory as the reason carriers have little to no choice but to pay up, especially now that the three largest carriers offer the iPhone. One carrier can't revolt because it would just send all those iPhone customers to a competing carrier, a risky bet that none is probably willing to make.
Even if AT&T and Verizon
Back to Apple
Facebook's historic IPO is now in the rearview mirror, and some had speculated that investors were rotating dollars out of Apple last week to invest in the social networker. Facebook shares got crushed today, as the offering has mostly fizzled out amid its lofty valuation.
Looks like those Facebook dollars are coming right back to Apple.
There are plenty of reasons you should buy Apple, and our senior technology analyst has put it all together for your reading pleasure in one in-depth report that's just been released. You'll also get free quarterly updates to keep you up to speed. Do yourself a favor and grab a copy while you still can.
Fool contributor Evan Niu owns shares of Verizon Communications, Apple, and AT&T, but he holds no other position in any company mentioned. Check out his holdings and a short bio. The Motley Fool owns shares of Qualcomm and Apple. Motley Fool newsletter services have recommended buying shares of Apple and Goldman Sachs Group and creating a bull call spread position in Apple. The Motley Fool has a disclosure policy. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. Try any of our Foolish newsletter services free for 30 days.