AmTech Previews Apple (AAPL) Highlights at WWDC '08

June 5, 2008 11:41 AM EDT

American Technology Research is out with a research note previewing expected developments at Apple's (Nasdaq: AAPL) World-Wide Developers Conference on June 9. AmTech reiterates its Buy rating and 6-12 month price target of $220 on Apple.

The firm expects:

• a new 3G iPhone model to be released on Monday, according to supply chain contacts
  
• Apple's 3G model to be priced similarly to current price points of $399 and $499 and sees a 2.5G version iPhone getting a $50-$100 discount.
  
• several new iPhone features including an improved virtual keyboard with haptics, GPS/location services and thinner casing.
  
• a new form factor touchscreen device which could look like a hybrid between a Mac and an iPod touch. AmTech estimates a 50% chance of this release at WWDC.
  
• a radically redesigned Mac this summer or fall, but sees a WWDC release by Apple as much less likely, despite the fact that the event is usually Mac oriented.

AmTech notes that "Apple shares are often volatile around Steve Jobs' keynotes." The firm says it does "not have a good feel for how the stock will trade on new product announcements..." given the likelihood that investors will use the conference to "sell the news". Keeping this in mind, AmTech said it would buy shares of Apple on any weakness, calling shares "a must-own large-cap tech stock..."

Interestingly, the firm is modeling 11 million iPhone's shipped by the end of '08, 1 million units higher than Apple's current estimate. AmTech predicts that for "every 1 million incremental iPhone units, we estimate $0.15-$0.20 in incremental EPS..." Looking at the Mac, AmTech notes that growth has created consistent market share gains and estimates that "every incremental 50bps (about 1.5 million Macs) of incremental share gain would be $0.45-$0.50" in EPS.

With shares of Apple currently trading around $188, AmTech's price target represents potential upside of about 17%. Notably, the firm sees "potentially much higher levels" from this price target based on earnings potential over a 12-24 month timeframe.

Apple, Inc. designs, manufactures, and sells personal computers, portable digital music players, and mobile communication devices, as well as related software, services, peripherals, and networking solutions worldwide.

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