Slash LaneCaris & Company on Thursday initiated coverage of Apple Computer with an "Above Average" rating and $100 price target, calling the company a clear "winner in the consumer electronics space."
In initiating coverage for Caris, analyst Shebly Seyrafi noted that Apple has two key catalysts for the 2007 fiscal year that are exciting investors and likely to help the company maintain its growth rate over the next few years — the iPhone and a widescreen iPod. However he also acknowledged some key short-term issues.
Based on a series of checks, the analyst said he does not expect Apple to meet bullish iPod shipment expectations of over 20 million units for the current holiday quarter and is instead modeling for around 16.5 million. He also told clients that he is modeling in front of the seasonally weak first calendar quarter, noting that the company's share price has appreciated by over 80 percent since July — or more than four times the approximate 20 percent increase in the NASDAQ.
Still, and in support of his Above Average rating, Seyrafi said Apple has "too many positives" going for it long term. Specifically, he pointed out the company's iPod unit share growth — projected at 41 percent for fiscal 2007 — and the potential for the iPhone initiative to account for 20 percent or more of the company's revenue within a few years if it can capture 4 percent of the worldwide cell phone market.
Other "positives" cited by Seyrafi include Apple's strong Mac sales and share gains as a result of the iPod "halo effect" as well as its extremely successful retail efforts.
Going forward, the analyst said Apple will need to meet some challenges in order to maintain its success. As some examples, he cited the need to work out acceptable arrangements with wireless carriers for the iPhones, continue its Mac growth in the face of a large Wintel install base and maintain its strong growth rate.
Seyrafi is modeling Apple to become a $38 billion dollar company in fiscal 2008, up nearly fivefold from the $8 billion in sales it generated during 2004.
Andrew Orr
Marko Zivkovic
Christine McKee
Malcolm Owen
Amber Neely
27 Comments
I think that the slide in AAPL's stock price today represents a buying opportunity. With the increasing consumer awareness of the high quality user experience of using Apple computers compared to Windows systems, the overall trend will be greater market share. The 'threat' of the Zune or delay in iPhone, will only be minor setbacks.
I am seeing a much larger number of Macbooks (pro) all over. Consumers, and many professionals, are embracing Apple. While the iPhone will have a significant positive impact on Apple revenue, the market share growth for computers alone will drive the revenues to stockprices justified at $100 or more.
If the recent report that Vista indeed is less secure than Microsoft suggests are true, even more consumers will floc to Macs. I think most Mac sales estimates are conservative, as is the market share is growing. I do think that that the iPod sales estimates are ambitious. If the iTV materializes, this will negate any disappointment in iPod sales. Consumers are starting to want "it just works" which is what Apple can, and does, deliver.
my 2.5 cents.
Applestockholder
The whole share analyst mumbo jumbo smacks of 21st century witch-doctory and the only reason analysts have any affect on the market is because a significant percentage of share holders are silly/superstitious enough to believe them...
2007 Catalysts
1) iPod
2) Leopard
3) iPhone
4) iTV
5) [One more thing...]
Apple will be getting bigger, that's clear. These analysts often state the obvious: Apple needs to watch out for competition in music downloads; Apple needs to watch out for competition to its computers; Apple needs to watch out for the pull of gravity. Duh!
The wind is in Apple's sales. This dip in this stock is just that, a dip. Much like the last time the stock started to plummet and everyone got their panties in a bunch, this drop is the result of profit taking by those who know it's going to go up again. They're selling now, because they'll buy big on the upswing. Read: January. Apple is a strong stock, so investors use it to make a quick buck. You can short a stock that you know is strong because you get profit from the downside, and from the upside when you buy again.
Apple will be bigger in 2008. They will be the American Sony (of the 70s and 80s). If I had more money now, I'd sink it all in AAPL.
The wind is in Apple's sales.
groan... (unless your misuse of "sales" was inadvertant)
On a separate note, I think it's funny that the price of AAPL is partly based on the expectation of an Apple phone. Even if such a thing is being worked on by Apple, who's to say that Jobs won't look at the final prototype and say, "nope, not good enough: back to the drawing board!" and we won't see it for another two years. Predicting Jobs must be hell!