Needham Goes Nuts: Starts Apple At 'Strong Buy' And $180 Long-Term Valuation

“Consumers are creating a new global distribution network over connected mobile devices, primarily smartphones,” according to Needham’s Laura Martin.

Martin pointed out investors should seek exposure to this huge trend and that Apple Inc. (NASDAQ: AAPL) was “arms dealer that dominates the wealthiest segment of this rapidly growing consumer market.”

The analyst initiated coverage of the company with a Strong Buy rating and price target of $150.

Stock Valuation

Martin believes Apple’s long term value could be $180 per share, suggesting 62 percent upside from the current levels.

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The analyst noted that through each of the past five years, the company’s profit margins were higher than those of Walt Disney Co (NYSE: DIS), while its asset productive was higher than that of Facebook Inc (NASDAQ: FB).

If Apple were to be valued as having fundamentals better than world class Internet and content companies, then the stock should trade at $200 per share, which represents 80 percent upside.

Churn

“Our survey research concludes that iOS platform churn is only about 12 percent annually, suggesting fewer competitive pressures, higher pricing power, more predictable revenue streams, and a halo effect that drives sister device sales and higher ancillary revenue than AAPL’s current share price implies,” according to the Needham report.

The survey of 300 iPhone owners also revealed that on an average the respondents owned 1.3 iOS devices, which implied that Apple’s one billion active devices were owned by 770 million unique users worldwide.