updated 09:15 am EDT, Thu July 14, 2005
Merrill Lynch on Q3
Apple is becoming a "mass market company" according to Merrill Lynch analyst Steven Milunovich. "The next perceptual change could be investor recognition that the company is building a sustainable consumer franchise." Although the current focus is music, "look for Apple to go after video in the home with an emphasis on high definition," Milunovich said. While Apple remains extremely conservative about its upcoming quarter, the firm projects $3.9 billion in revenue and $0.38 per share. "Company guidance for flat sequential F4Q revenue and down earnings of $0.32 seems too conservative even recognizing a software decline."
Important variations from expectations included:
- (1) higher software
(2) a gross margin 130 bps above guidance thanks to software and lower
(3) iPod unit sales of 6.2 million versus our 5.5 million
"Mac sales reflected the halo effect though notebooks suffered a tough comparison. Mac sales in total and by product were as we expected. The 24% YoY revenue increase was slower as notebooks grew by only 3% on a tough comparison. Still, Apple grew 3X the overall PC market."
Merrill Lynch reiterated a Buy rating with a price objective of $51 per share.