Concerns about Napster’s subscription service and Sony’s flash memory-based portable music players eating into Apple’s iTunes Music Store and iPod sales is overdone, according to a Wall Street analyst. In a research note obtained by The Mac Observer, JP Morgan‘s Bill Shope raised his estimates for the March quarter to earnings per-share (EPS) of US$0.24 on revenues of $3.23 billion, versus $0.23 and $3.17 billion previously.
Mr. Shope told clients that Apple is experiencing strong momentum across all of its product lines, and the iPod shuffle and PowerBook lines are performing very strongly. He also reiterated his feeling that Apple’s iTunes Music Store (iTMS) and iPod businesses are, "protected by a unique blend of technical and legal barriers to entry which we believe will mitigate the recent moves by Apple’s competitors in the space."
In recent days, Apple’s stock has traded lower on concerns that Sony’s flash-based Walkman music players and Napster’s subscription music services posed a serious threat to Apple’s music businesses. The stock has shed some 11% of its value from its high of $45.44 set in February, closing at $40.27 on Friday, March 11th.
In contrast to these worries, Mr. Shope wrote, "Our checks indicate that Apple’s March quarter momentum appears to be exceeding typical consumer seasonality. In terms of iPod shipments, the early and somewhat surprising momentum of the iPod Shuffle appears to be the most notable contributor. On the CPU side, continued evidence of ‘Halo Effect’ and a resurgence in high-end laptop momentum from PowerBook refresh represent notable sources of upside potential."
Mr. Shope maintained his Overweight rating, which means that he recommends to his clients that they keep more Apple stock in their portfolios than other, similar stocks.
He raised estimated for fiscal 2005 to $13.57 billion in revenue, with EPS of $1.15, versus $13.43 billion and $1.12 previously. For fiscal 2006, he raised revenue estimates to $15.28 billion and his EPS estimate to $1.24, versus $15.16 billion and $1.21 previously.
Apple’s stock is trading lower in moderate volume in early afternoon trading.
*In the interest of full disclosure, the author holds a small share in APPL stock that was not an influence in the creation of this article.