Apple still better positioned than most, firm says
Even as stocks melted down on Monday and fears of tough recession set in, analysts at Piper Jaffray held strong to their Buy rating on shares of Apple, saying the company remains the best positioned amongst its peers to weather the economic storm.
For his part, however, Munster remains confident in his outlook for the Cupertino-based company and offered a number of supporting arguments.
While the consumer market is clearly slowing, Wall Street's models on Apple already account for reduced spending, but at the same time may be over-discounting the company's Mac growth prospects, he said.
The analyst estimates the company to achieve 40 percent Mac growth for the entire 2008 fiscal year, with 16 percent growth in fiscal 2009. He also expects 19 percent growth during the fiscal first quarter of 2009 (Dec.), all of which are above Street estimates.
"Overall, we believe Street models are too low for Mac in fiscal 2009," Munster wrote. "This fear of a Mac slowdown is driven by US durable goods data, and the NPD data point from two weeks ago, suggesting Mac growth has slowed from 43 percent year-over-year in July to 23 percent in August."
Those figures may turn heads when taken at face value, but represent a difficult compare year-over-year, he explained. Last August, Apple saw a burst of Mac sales after introducing the first major redesign of its iMac line in years. This year many consumers may be holding off purchases in anticipation of new MacBook, MacBook Pro and iMac models which have yet to see an introduction.
The analyst also believes concerns that Apple will be forced to take a steeper hit on gross margins will also "prove to be overblown." He's modeling the company to guide December quarter margins to come in around 30 to 31 percent, or above its overall fiscal 2009 guidance of 30 percent.
Lastly, Munster said fears that the company will be forced to make a disappointing pre-announcement of September quarter results appear to be unsubstantiated, with signs suggesting the company will actually beat Street estimates once again.
"We do not believe Apple will preannounce a disappointing September quarter," he wrote. "Our analysis of two months of NPD data on Mac and iPod, which has a 0.90 correlation, suggests 5 percent upside to Street numbers."
The analyst maintained his Buy rating and $250 price target on shares of the company, as well as its place on his firm's Alpha List.
"We believe fears of a continued global slowdown will impact equity investments in the tech sector," he wrote. "But our thesis leads us to conclude that Apple is better positioned than other tech players to weather the storm."