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AAPL Stock: 111.78 ( -0.87 )

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Analyst cuts iPod sales, sees buyers upgrading

updated 11:50 am EST, Tue December 16, 2008

Apple financials examined

Shaw Wu of the Kaufman Brothers has updated estimates of Apple's December quarter, Rating Apple stock a buy with a favorable risk-reward balance. Wu's estimates have seen little movement, with a more conservative approach on iPods, but assuming a higher average sales price (ASP). Expectation are of reductions in the strong European iPhone sales, primarily due to iPhone gift cards; many won't be activated between Christmas and New Year's, moving the profits to the March quarter.

The iPod touch and iPod nano are still in high demand, with shortages appearing in some major retailer, while the iPod shuffle has weaker sell through. Analysis on the shuffle sees customers opting for higher-performance iPods as a recognition of better value. Wu cut forecasts on iPod unit sales from 21 million to 19 million, but raised ASP forecasts from $152 to $159.

The iPhone has remained strong in both the US and Asian Pacific zones, while appearing to be slowing in Europe, but likely impacted by the iPhone gift cards. Wu is taking a conservative approach, predicting unit sales between 5.6 million to 6 million, while raising March quarter estimates from 4.5 to 4.7 million.

The analyst is still predicting overall revenue at $10 billion for the December quarter, with earnings per share (EPS) at $1.47. Fiscal 2009 estimates are now $35.2 billion in revenue and $5.05 in EPS, down slightly from the previous $35.5 billion estimate.

For 2010, estimates are $42.4 billion revenue and $6.45 EPS. Despite predicting financials below the consensus of peer estimates, Wu is positive on Apple's stock, siting strong fundamentals and favorable risk-reward opportunities for longer-term investors, with target prices at a conservative $120 per share. Apple is trading down slightly, at a $93.76 share price at press time.




by MacNN Staff

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