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UBS Blesses Apple iPod Price Cut Strategy
Monday, September 8th, 2008 at 4:00 PM - by John Martellaro
UBS Equity Research analyst Maynard Um wrote, in a note to investors on Tuesday, that Apples refresh of the iPod line is a necessary and appropriate strategy to maintain the companys market share.
In a note obtained by iPO, Mr. Um said, "We expect the lower pricing to drive demand elasticity, and while the cost reductions could raise concerns about gross margins, we believe it will stimulate demand and benefit profits."
The UBS analyst also believes that the recent pullback in AAPL is not a reflection of Apples fundamentals, which remain intact, but more market related. "We continue to think AAPL will benefit from further product refreshes, price elasticity and continued ramp of the iPhone," he wrote.
Mr. Maynard set an AAPL target price of US$195 which reflects an adjusted FY09 Earnings Per Share [EPS] of US$7.20.
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