Apple: Needham Ups Target To $750; Bullish On iPhone

Needham analyst Charlie Wolf earlier today repeated his Buy rating on Apple shares, while boosting his target price on the stock to $750, from $620. I’d note that he more or less had to do something about the price target, with the stock yesterday trading in the $656 range, well above Wolf’s old goal.

“Since our previous valuation exercise in February 2012, Apple’s sales have continued to grow, although more slowly than in the hype-growth period following the launch of the iPad and iPhone 4S,” he writes in a research note. “The increase in our price target stems chiefly from across-the-board upward revisions in all of Apple’s businesses, with the iPhone contributing almost half of the increase.”

Wolf writes that iPhone sales have far exceeded his projections despite recently soft sales in advance of the expected launch of the next generation model. He adds that iPad sales likewise have continued to grow faster than Needham has been expecting. And he says that Mac sales likewise have prospered, benefiting in part from the the halo effects from the iPhone and iPad.

Take a look at the adjacent chart in which Wolf breaks down how he values the various Apple businesses. Just for fun, I took it one step further, and used the same percentages as applied to the company’s current market cap of $627 billion. The results are fascinating.

• If you assume that 43.1% of the value of the company comes from the iPhone, that would be a valuation of $270 billion – which would make the iPhone business worth more than Microsoft.
• The iPad business would be valued at $92.2 billion, and the Mac business would be worth $84 billion; either of them worth more than Hewlett Packard, Dell, Research in Motion and Nokia combined.
• The software unit would be worth $37.6 billion, or a little more than HP.
• The iTunes and App Stores combined would be worth $37 billion, just a smidge more than Starbucks.
• And the iPod business would be worth $2.5 billion, about $1 billion more than Pandora.

On Wednesday, Apple set yet another record close, gaining $12.81, or 2%, to $668.87.