Analyst expects "actual" video iPod soon

Needham and Co. analyst Charles Wolf today raised his earnings estimates for Apple, but reiterated a "hold" rating with a $71 target due to Apple's current valuation-- despite higher targets by both Citigroup and Piper Jaffray. Wolf expects new product introductions by Apple to accelerate in 2006 and that the Intel-transition will "materially" increase Mac sales; he also said that the "actual" video iPod will make its debut in the the first half of 2006. Many believed that the first iPod video model, which debuted in November, was a "holdover" to grab attention and marketshare, while the company was feverishly working on an improved version for release at a later date. The analyst also said that Apple will announce new "major content deals" in the coming months as well as try to move into the living room with a revamped Mac mini, although he does not expect the much-rumored "iPhone" to be introduced in 2006.

"We would not be surprised to see the Mac mini assume its rightful place in the living room as a digital entertainment server. Major content deals should accompany these introductions. To date, Microsoft’s Windows Media Center software has failed to establish even a beachhead in the living room because the company insists on imposing an impossibly complex system on consumers. With its DNA wrapped around simplicity, Apple’s represents a far better bet to succeed in its effort."

Wolf raised his fiscal 2006 earnings per share estimate from $1.95 to $2.05 and its 2007 estimate from $2.40 to $2.50. The firm noted that investors can expect a greater seasnonal decline during the March quarter, as iPod- and music-related sales represent a growing fraction of Apple’s total revenues. In the December quarter, music revenue was 59 percent of Apple's total revenues compared to 41 percent in the year-ago quarter.

Filed under: iPod