World of Apple

Last week Piper Jaffray analyst Gene Munster set out his predictions for Apple’s current fourth quarter which ends on September 30th.

This week the analyst has raised his estimates, based on a report from NPD the analyst writes that he is “incrementally more confident” in Apple’s unit sales.

Munster now expects Apple to sell 2.8 million Mac units, up from 2.5 million in last weeks estimates. The analyst also raised unit sales estimates for iPods and iPhone expecting 11 million iPods to be sold (previously 10.8 million) and 5 million iPhone sales (up from 4.1 million).

During the first six months of 2008 Apple sold 2.4 million iPhones, adding in Munster’s estimates would raise that figure to 7.4 million iPhones well on the way to Apple’s self imposed target of 10 million iPhone sales in calendar 2008.

In addition Munster added that this quarters iPhone revenue will be a “meaningful percentage”, last quarter which ended in June the iPhone accounted fro 4% of booked revenue, this quarter Munster estimates that booked revenue will account for 21%.

With this in mind Munster is also adjusting his metric increasing his estimate of Apple’s fourth quarter earnings 13%, from his previous estimate of $1.04 a share to $1.17 a share (the Street estimate is $1.11 a share). Under his new metric booked EPS would be $1.60.

Munster’s price target for calendar 2009 remains at $250 per share.

Gene Munster, analyst for Piper Jaffray is today noting that Apple could sell as many as 2.9 million Macs and 11 million iPods in the current quarter.

In a note to clients Munster wrote, “that Apple will sell 2.8 to 2.9 million Macs and 11 million iPods in its fourth fiscal quarter, which ends Sept. 30… based on data released at midday by the NPD Group”.

“The Mac numbers represent year-to-year unit growth of 29 per cent to 34 per cent,” continued Munster. The sale of 11 million iPods would represent a 8 percent year-on-year increase, ahead of the streets estimate of 6 percent.

Finally, Munster shows less enthusiasm for iPhone sales, predicting just 4.1 million units will have sold by the end of the current quarter. He continues to note that he expects Apple to exceed its originally stated $7.8 billion in revenue and will instead report revenue of $8.5 billion.

After WWDC in June the subject of Steve Jobs’ health was a highly discussed point; at the time many believed that the Apple CEO was ill, causing detrimental effects on the stock price as well as investor confidence.

The rumours of an ill Jobs were put to bed after a reporter purportedly received an abrupt phone call from Jobs himself who revealed in detail his health.

Today, analyst Gene Munster of Piper Jaffray stated that he expects Steve Jobs to be on hand at tomorrow’s media event which should boost the confidence of investors and boost the price of shares.

“We are confident that Steve Jobs will be presenting and we anticipate his appearance at the event to be viewed as a positive,” Munster wrote under the heading Steve Jobs’ Appearance Will Be Key in his report to clients on Monday.

“While some investors are concerned that Jobs will not deliver the keynote,” wrote Munster, “we have reason to believe he will. Therefore, we believe his health has improved since the June event, which would be a positive for the stock.”

[Update] John Gruber notes on his blog that Jobs is “just as thin as he was in June”.

Despite next weeks Apple event being penned as “a very big deal” Shaw Wu has today warned clients that the September 9 event could be “underwhelming”.

In the same note the analyst for American Technology Research noted that MacBook Pro and MacBook refreshes are not expected at next weeks event as the focus of the event appears to be on Apple’s non-Mac business.

The analyst retained his “buy” rating on Apple with a 6-12 month price target of $220.

Full transcript of Wu’s note after the jump.

Low Expectations for a Break-Through Announcement:

While there is always room for surprise, it seems this event may be somewhat underwhelming vs. previous expectations and events. Over the past several days, AAPL shares have pulled back as expectations have likely come down.

Likely iPod Centric:

The “Let’s Rock” invitation and our recent supply chain checks suggest this will likely be an iPod-centric event. This may be viewed as disappointing as some were hoping to see new Macs. We think radical changes in the iPod portfolio are less likely given the great success and extensive refinement iPod has already undergone. We anticipate a modestly redesigned 4th generation iPod nano and slimmer 2nd generation iPod touch with lower price points and higher storage capacities. The future of the 6th generation iPod classic is unclear as our checks indicate build plans have been more modest as it has become more a niche product.

New Macs Not Likely At This Event:

We continue to believe that MacBook Pro and MacBook are due for refreshes with more radical redesigns, but won’t likely be unveiled at this event. We are picking up that MacBook Air could see a minor refresh and potential price cut to increase its value proposition. Checks indicate that build plans have slowed somewhat from earlier robust levels with customers opting for MacBook or MacBook Pro.

Potential Wildcards:

We believe wildcards on new products are:
1) an advanced AppleTV with DVR and TV tuner capabilities and/or
2) new touch form factors (iPod-Mac hybrid) with larger screens.

Conclusion:

While AAPL shares will likely remain volatile given market sentiment, we view current levels as a buying opportunity for longer-term investors. AAPL remains one of the best positioned large-cap technology companies. We see upside to $220 based on 32.5x our CY09 EPS of $6.73.

Event Likely Less Surprising But There Is Always Room for the Unexpected:
Heading into this event, our concern is that it could end up being one of the less surprising ones simply because AAPL product expectations are always high (given its strong track record and world-class R&D) and radical changes in its iPod business are likely more difficult to achieve given the great success and extensive refinement it already has. Nonetheless, there is always the likelihood for the unexpected and we think there are two potential wildcards including an advanced AppleTV with DVR and TV tuner capabilities and new touch form factors with larger screen (iPod-Mac hybrid).

New iPods Most Likely:

Our recent supply chain checks indicate that this event will most likely usher in new iPods, including a modestly redesigned 4th generation iPod nano and slimmer 2nd generation iPod touch with lower price points and higher storage capacities. The fate of its 6th generation iPod Classic is unclear as build plans have been more modest. We think this product remains attractive to those users who value high-capacity storage (80 and 160 GB), but the “old” design and cannibalization by iPod touch limit its appeal.

New Macs Not Likely At This Event:

We continue to believe that MacBook Pro and MacBook are due for refreshes with more radical redesigns, but won’t likely be unveiled at this event as the focus appears to be on its non-Mac businesses. In addition, we are picking up that MacBook Air could see a minor refresh and potential price cut to increase its value proposition as build plans have slowed from earlier robust levels as customers have opted for MacBook or MacBook Pro instead.
Lower iPod Price Points Make A Lot of Sense.

In this tough macroeconomic environment, we believe price cuts make a lot of sense to re-accelerate iPod sales, particularly iPod touch, which is somewhat mispriced (outside of its recent back-to-school promotion) at $299 (8 GB), $399 (16 GB), and $499 (32 GB) price points given the lower $199 (8 GB) and $299 (16 GB) price points of the 3G iPhone with 2-year service plans. We believe AAPL should be able to absorb lower price points without impacting its margins materially given very favorable component pricing trends.

Competitive Advantages Intact:

We believe AAPL’s key competitive advantages remain its 1) strong brand loyal customer base; 2) vertically and horizontally integrated hardware, software and service model (iPod + iTunes, Mac, Apple TV, and iPhone); 3) proprietary interface technologies (clickwheel and multi-touch); and 4) unique and pleasant customer experience with its Apple stores.

Macro headwinds are becoming more apparent:

We continue to see AAPL as the best play on digital media in the home and a large beneficiary of the shift to mobile computing. In two of its three big franchises, Mac and iPhone, penetration is very low and starting in the higher-income demographics. The disturbance in the macroeconomic environment is within lower-income demographics and financial institutions with exposure and impact to overall liquidity. This could certainly spread, but we believe AAPL’s business will remain strong in the near- to medium-term. Enough high-end consumers are still buying tech, though commodities inflation could pressure future margins.

When Apple announced that it expected to sell 10 million iPhones in 2008, some were doubtful, such as Bernstein analyst Toni Sacconaghi who projected that Apple could easily come 20% short of its goal. However, the general outlook has changed dramatically. Earlier this month, Piper Jaffray’s Gene Munster projected that 4.4 million iPhones (up from his prior estimate of 4.1 million) are likely to be sold in the fiscal fourth quarter. Credit Suisse’s Bill Shope is also reconsidering his prior fourth quarter projection of 4.2 million iPhones. (via Tech Trader Daily) As far as total iPhone sales for the year, BusinessWeek reports,

Many analysts expect Apple (AAPL) to sell around 11 million iPhone 3Gs in 2008 and another 25 million in 2009. But perhaps the most optimistic forecast is from Piper Jaffray (PJC) analyst Gene Munster, who expects the company to sell 13 million this year and 45 million next year.

Further a source identified only as “someone familiar with the company’s plan” has told BusinessWeek that Apple is intending to manufacture between 40 million and 45 million iPhones in the next twelve months.

I don’t envy the MobileMe development team one bit for it is upon their shoulders to ensure that this epic win doesn’t turn into an epic fail.

Piper Jaffray analyst Gene Munster stated in a note to clients Wednesday that he has increased his estimate of the number of iPhones he expects Apple to sell worldwide in its 4th quarter, from 4.1 million to 4.47 million.

In contrast, Apple sold only 1.12 million iPhones in the same quarter of 2007.

“Our 25 hours of counting iPhone sales in Apple retail stores throughout the country lead us to believe Apple is on pace to beat our previous estimate of 4.1 million iPhones for the September quarter,” analyst Gene Munster wrote.

The analyst is estimating that Apple sells an average of 95 iPhone 3Gs per day at each of its 188 U.S. retail stores.

“We believe Apple will sell 1.78 million units at its U.S. retail stores, and 0.90 million phones at U.S. AT&T locations”, Munster wrote. “Our estimate assumes each of the 2,200 AT&T stores will sell an average of 5 phones per day from the July 11th launch through the end of the September quarter”.

Munster’s team checked U.S. Apple stores for two weeks and in that period noted a 10-percent decrease in sales during the second week. For this reason Munster’s model accounts for the ever decreasing sales of the iPhone 3G.

On that basis Munster’s fourth quarter estimate assumes Apple retail stores will average 31 iPhone sales per day for the remaining 51 days in the quarter.

“We believe that our revision may be conservative and that Apple will meet our estimates,” he wrote. “The August 22nd launch in additional countries should provide another catalyst to sales.”

Last week analyst Gene Munster wrote a note to clients informing them that Apple would most likely hold a Special Event in September to refresh its iPod lines and MacBook and MacBook Pro notebooks.

At the time the report was mainly pinned as speculative but Mac Rumors has heard “whispers” of an iPod touch refresh within the specified timeframe but offers no details above this.

Today also saw another analyst for Piper Jaffray weighing in on the speculation. Mike Olson wrote in a note to clients today that he expects a refresh to the iPod touch in line with the iPhone 3G. In addition Olson expects the starting price of the iPod touch to drop from $299 to $199.

Olson doesn’t mention the MacBook Pro in his report but does report on slimmer MacBooks cryptically explaining “exteriors made of plastic instead of aluminum and could also have a newly designed keyboards”.

This week Piper Jaffray analyst Gene Munster has sent a note to clients speculating on past years. The reports states that for the last three years Apple has held a Special Event in September and the analyst is predicting the same.

Munster in particular expects iPods to be the focus of the event with the iPod shuffle and iPod nano taking a backseat receiving only capacity increases. On the other hand Munster does expect a price cut for the iPod touch down to $199 with a design change similar to that of the iPhone 3G.

In addition to an iPod announcement Munster also expects a complete overhaul of Apple’s notebook line barring the MacBook Air.

“We note that the MacBook has had the same design since its launch over two years ago, and the MacBook Pro has had essentially the same design since its launch over 2.5 years ago, which was very similar in design to the PowerBook G4 released over 5.5 years ago,” he told clients. “To compare, the long-running iMac G5 design lasted three years.”

Munster expects new looks for both the MacBook and MacBook Pro with the MacBook re-entering the $999 price point bracket.

The Jaffray analyst retains a Buy rating on AAPL with a price target of $250.

AppleInsider is today reporting on a note sent by investment firm Piper Jaffray to clients based on Apple’s outlook for the rest of 2008 and 2009.

During yesterdays financial conference call Apple stated that it expects gross margins to be down from 34.8% to 31.5% in the current quarter (Q408) with a further decline to 30% for fiscal 2009.

While Gene Munster of Piper Jaffray acknowledges that Apple is always conservative in its outlook, he also expects Apple to cut prices of existing products to maintain sales.

“We believe there is an 80% chance Apple will introduce redesigned MacBooks and possibly new MacBook Pros at lower price points,” the analyst wrote. “Specifically, Apple may re-enter the $999 price point (currently $1099) with the MacBook, or test the $1,799 price point with the MacBook Pro (currently $1999).”

Munster also spoke about iPods, he expects a “slightly redesigned iPods” that will include “lower-cost touch-based iPods” just in time for the holiday shopping season.

Piper Jaffray maintains a buy rating on Apple with a price target of $250.

Over the last 24 hours two big names in research have released figures for the PC industry, one putting Apple in third place the other just behind.

Gartner is reporting that Apple is sitting pretty at number three on the U.S. shipments chart shipping 8.5% of the countries PCs in the second quarter of 2008. That represents 38.1% growth over the same quarter in 2007 for Apple. The industry growth pace is said to be around 4.2%.

Although Gartner is placing Apple ahead of Acer in third place, IDC is putting the two companies in joint third position, giving Apple a 7.8% market share. IDC puts Apple’s year-over-year growth at 31.7% against an industry average of just 3.6%.

These figures just represent shipments in the U.S., Apple is yet to break into the top five vendors worldwide.