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Apple shares near $500-mark Add to ...

It’s hard to take your eyes off Apple Inc. these days: The shares hit a new record high of $495 (U.S.) on Thursday, bringing the total gains to about 18 per since the technology company announced stunning quarterly results in January.

Analysts aren’t shying away: Michael Walkley at Canaccord Genuity raised his target price to $665, which suggests an expected gain of 32 per cent over the current price. His enthusiasm stems largely from strong demand for iPhones.

“Our monthly channel checks indicated very strong sales trends for the iPhone 4S at all three U.S. carriers and overall strong iPhone sales in international markets,” he said in a note. “We are increasing our March quarter iPhone estimates from 30.1 million to 32.6 million units.”

But he also has a fascinating observation on the extent to which Apple is hogging all the profits among handset companies. He said that Apple earned an estimated 80 per cent of all handset operating profits during the fourth quarter, up from 56 per cent in the previous quarter – and that’s with a mere 8.1 per cent global market share in handsets.

Apple is not only selling a lot, but is commanding an industry-high operating margin of 47 per cent. By comparison, Samsung Electronics Co. Ltd.’s operating margin is estimated at 15 per cent and Nokia Corp.’s is just 3 per cent. As for Research In Motion Ltd., its operating margin has shrivelled to 8 per cent from 28 per cent in the fourth quarter of 2010.

“While RIM gained value share in 2008 and 2009 through expanding its BlackBerry base from enterprise to consumer customers, RIM is now struggling to compete with Apple and Android and its share of industry profits sharply declined from 2009 to 2011,” Mr. Walkley said.

So are investors psyched about operating margins and profit share? More likely, they’re currently focused on the prospects of a new iPad model. AllThingsD reported on Thursday morning that Apple could unveil the iPad 3 in the first week of March, with a faster chip, better graphics and improved display. Apple’s tightlipped on the report, though.

UPDATE: An earlier version of this article stated that Mr. Walkley's target price on Apple was $655. It is actually $665. The text has been corrected.

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  • Updated May 26 4:00 PM EDT. Delayed by at least 15 minutes.


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