It’s not often Wall Street analysts use farming analogies to explain technology stocks. However, Needham & Co.’s Charlie Wolf Monday points to the growth rate of hybrid corn to explain the rocketing popularity of Apple’s iPad tablet. Indeed, the analyst expects 35 million of all sorts of tablets will sell in 2011 – 90 percent carrying the Apple logo.
Like the growth of hybrid corn in the 1920s, outlined in Everett Rodgers’ The Diffusion of Innovations, Wolf sees the iPad as only the latest technology following the “S-Curve” of slow early growth, followed by faster expansion, then slowdown. Computers followed this growth pattern in the 1980s, as well as the iPod.
“Our forecast of the iPad’s ultimate share of the media tablet market is materially higher than the forecasts of most pundits,” Wolf noted Monday. The reason? Most pundits are “confusing the media tablet with the smartphone market.,” according to the analyst. While smartphones are driven by carriers who can make the handsets “revenue producers” through adding services, software and content, tablets “are primarily content consumption, not communications devices,” he tells investors.
Media tablet will more closely resemble the MP3 market, dominated by the iPod, rather than the smartphone market, according to Wolf.
As a result, Wolf raised his estimate for smartphone sales during last year to 300 million, up from a previously expected 250 million devices. The analyst was also low in his estimate for iPhone sales last calendar year, projecting 40 million while actually resulting in 47.5 million Apple handsets sold.
Additionally, the analyst projects Apple will sell 75 million handsets in 2011, its marketshare rising from the current 16 percent to 22 percent in the next decade. The projections assumes Verizon sells 16 million iPhones this year and the same amount in 2012.
In the end, because of higher-than-expected iPhone and iPad sales, Wolf boosted his target price for Apple shares to $450, up from his previous $350 mark.
[Barron’s]
