Are some investors and analysts dismissing the impact that upcoming Apple (NASDAQ:AAPL) technologies and distribution deals will have on the Cupertino-based company’s stock price? In a note to investors, Wells Fargo analyst Maynard Um outlines two key developments that could propel Apple’s stock price as high as $575 in fiscal year 2014.
First, the analyst believes that the continuing distribution expansion for Apple’s iPhone could soon add significant value to Apple stock. He notes that Apple has recently become “less rigid with wireless operators” in establishing distribution deals.
Based on the history of other smartphone companies such as BlackBerry (NASDAQ:BBRY), Um believes that Apple will soon increase its carrier penetration, especially in the prepaid market. T-Mobile (NYSE:TMUS) recently began carrying the iPhone in April of this year. Rather than using conventional long-term contracts, T-Mobile’s “Un-carrier” approach sells phones to new subscribers for the unsubsidized prices.
Apple may also establish new distribution deals with carriers in overseas markets. The upcoming debut of a lower-cost iPhone and CEO Tim Cook’s recent meeting with China Mobile (NYSE:CHL) Chairman Xi Guohua has sparked rumors that Apple may soon ink a deal with the world’s largest carrier.
NTT DoCoMo (NYSE:DCM), Japan’s largest carrier, has also indicated that it would be willing to carry the iPhone if Apple was willing to relax its stringent carrier conditions. Um thinks that increased operator penetration alone could add $6.55 or more to Apple’s earnings per share in fiscal year 2014.
Second, Um believes that the positive impact of Apple’s AuthenTec acquisition is being underestimated. Apple acquired the mobile and network security company last summer, presumably to obtain its patented fingerprint sensor technology. Many analysts believe that Apple’s upcoming flagship iPhone upgrade will include a fingerprint sensor as a security feature and method for executing mobile payments.
Since a fingerprint sensor could be used as a secure payment method, Um notes that this feature could give the Cupertino-based company a strategic edge over its competitors in the burgeoning mCommerce business. The analyst points out that this technology could also boost Apple’s enterprise presence since “device-side authentication” could have important security benefits for enterprise.
Based on these two key developments, Um raised his price target range for Apple to $525-$575 from $485-$525. Here’s how Apple has traded so far this week.
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