Analysts upbeat on AAPL

Despite the recent 20 percent drop in Apple's stock, some analysts continue to have faith in Apple and say that the recent weakness presents a buying opportunity for investors. Analyst firm Piper Jaffray today reiterated an 'outperform' rating on Apple's stock, saying that investor concerns over the Intel transition are short-sighted, despite the waiting for professional level software from Quark, Microsoft, and Adobe, who recently said that Intel-native software may be one year away. Reiterating a 'buy' on the stock, analyst Shaw Wu of American Technology Research also said the stock has potential upside with a strong Intel transition outlook and improved iTunes/iPod penetration as well as an upcoming Apple media event that will shed some light on future product plans.

In a research note sent to clients, Piper Jaffray said that while there may be a slow down in sales of the new Intel Macs to professionals, other parts of the business will help offset slow Pro sales. However, the firm said that there was not any significant upside to Apple's earning in the next few quarters, but that the company is well positioned for another peak in the coming months.

"We would argue that Apple has, and will continue to have, various growth curves in different parts of its business that will sometimes be in sync with each other and sometimes not. To look at a potential short-term trough in these curves and extrapolate the business based on this period is short-sighted in our minds," Piper Jaffray Senior Analyst Gene Munster said.

Media event, new products, iMac sales

ATR analyst Wu said that the recent pressure is similar to the weakness last year--a downturn in the company's stock from March to June 2005 when the stock corrected from $45 to $33--down 27 percent. He expects a media event and new products will provide more color on Apple's future and that strong iMac sales will help drive the company's upside.

"Over the next 12-24 months, we expect significant upside from the INTC transition, continued penetration of iPod + iTunes in digital music and video, and extension of both the Mac and iPod + iTunes franchises into new business areas including home entertainment servers, cell phones, and other consumer electronics," Wu said in a note released this morning.

"We are also expecting a significant media event sometime in the next few months which should shed positive light on the Intel transition as well as potential new product introductions."

Multiple revenue streams to offset weakness

Citing Apple's successful transition from the iPod mini to the iPod nano, Piper expects that Apple will also successfully manage the Intel transition and that while a "slight air pocket is inevitable in front of all new product releases," the company has already factored in the "sales pauses" into its Mac sales estimates, which are inline with sequential changes expected--especially, given the new iMac sales launch.

"We do not believe the transition will lead to Apple missing numbers. In the March quarter, we are expecting sequential Mac unit growth of 44,000 units; this is only slightly above the sequential Mac unit growth seen in the March 2005 quarter of 24,000 units. Meanwhile, this year Apple has a new iMac and the much-anticipated MacBook Pro vs. last year's release of the Mac mini, which was a confusing product for many potential customers," Munster wrote.

While concern for native Mac professional is real, Munster said that the company would manage its sales using other product lines, including a forthcoming iBook for consumers, which it says will likely be available prior to the back-to-school rush. However, the firm did say that the delay in native Intel software for professionals would draw out the Power Mac transition.

"The transition to the Intel-based Power Mac may be drawn out longer than hoped, as professional Mac users wait for optimized software, but we believe Apple's real opportunity in the coming quarters is taking share in the consumer market with the iMac, iBook, and MacBook Pro. In addition to the other Intel-based Macs, expect Apple to release new iPods, an 'iPhone' and other devices such as AirPort for video in the next 4-6 quarters, all of which will have growth curves that may align with other products that are hitting stride and lead to the next peak."

Piper Jaffray has a $103 price target on Apple and an 'outperform' rating on Apple stock, while Shaw Wu has a $101 price target. Apple stock is up slightly by $0.28, or 0.42 percent, from yesterday's close.

by MacNN Staff