If you're still dreaming of grilled bratwurst and ribs (or gardening or the beach) after the long Memorial Day holiday weekend here in the United States, you may want to wake up and check your portfolio –- especially if you own shares of Apple Inc. (NASDAQ: AAPL).
Apple stock is on a tear this morning up almost $7 (~5.5%) to around $130 at the stroke of noon eastern time. While many would attribute the rise in AAPL shares to the fact that the market in general is up this morning, others will say that it's the imminent announcement of the third-generation iPhone that's pumping the stock.
Another reason for the rise in AAPL shares is a new report from Morgan Stanley analyst Kathryn Huberty increasing her rating on the stock to Overweight from Equal Weight, lifting her price target to $180, from $105.
Citing better long-term growth potential than the Street generally realizes, Huberty writes “iPhone is feeding earnings growth that the market is missing,” and “We believe Apple is emerging as the clear leader in the battle over the mobile Internet. We size this as an incremental 4 billion installed base opportunity for Apple, 4x the installed base of PCs and 10x the installed base of MP3 players.”
Huberty goes on to call Apple's September 2009 quarter a “key inflection point” noting that an expected iPhone price cut...
...could drive 50%-100% incremental unit demand: a $50 price cut should drive 50% growth, she says, and a $100 cut, a 100% increase. She also says 15%-plus of the current installed base typically upgrades to a new generation phone.
More on the report is available from Barrons.