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Further Upside for Apple on iPhone Shipments: Pro

Monday, 27 Aug 2012 | 4:37 PM ET
iPhone 4 from Verizon
Apple
iPhone 4 from Verizon

A U.S. court’s ruling that SamsungElectronics infringed on Apple’s patents is less about the $1.05 billion in damages that Samsung will have to shell out and more about how the ruling will impact the smartphone competitive landscape, one analyst said.

Will Power, an analyst at R.W. Baird, told CNBC’s“Squawk on the Street” that the ruling is “clearly a positive to the degree that it impacts Samsung’s ability to ship into the U.S.”

Apple submitted a court filing on Monday to seek a preliminary ban on U.S. sales of eight Samsung mobile devices, pending the Sept. 20 hearing on the proposed sales injunction against Samsung.

The preliminary injunction request includes banning sales of Galaxy S 4G and the Droid Charge.

Power has an “outperform” rating and a $740 price target on Apple’s stock. Power’s price target is based on 13 times earnings with no consideration for the pile of cash on Apple’s balance sheet. That’s basically in line with multiple on the S&P 500 index.

The company’s shares ticked higher on Monday in the first full trading day following the ruling.

As the rumored fall launch of Apple’s next iPhone draws near, Power thinks some investors could sell shares on the announcement in a profit-taking move. Still, there is further room to run for Apple’s stock in the medium to long term, Power said. He added that there is “substantial upside” for iPhone shipments relative to analysts’ estimates.

Apple's Billion Dollar Win
Will Power, Robert W. Baird senior analyst, discusses what Apple's lawsuit win means for the tech ecosystem and the protection of intellectual property.

“I think my expectation is that as iPhone shipments rise and our estimates rise, that pushes the earnings estimates higher which even on the same multiple would probably push our target price higher,” he said.

Like Apple’s stock, shares of Nokia also rose after the ruling as investors’ bet that the company would benefit from the setback for Samsung.

Power has a “underperform” rating on both Research In Motion and Nokia and said: “We’d be sellers in the strength on both of those.”

Power said the verdict could provide a window of opportunity for RIM and Nokia depending on how damaging the injunction looks and how it impacts the Android ecosystem.

Still, Power said he thinks Samsung and the other Android players will either reach an agreement with Apple or find a way to work around the injunction.

“So I think long term the same challenges are still facing Nokia and RIM tomorrow as they were yesterday,” he said.

—By CNBC.com’s Katie Little; Follow Her on Twitter @katie_little

Additional News: How Apple Overwhelmed Samsung’s Tactics

Additional Views: Can Apple’s Run Continue?

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Disclosures:

R.W. Baird makes a market in the securities of Apple.

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