Mr. Wu has added one million iPods to his original forecast for Appleis September quarter, which ended last week; results will be announced on Oct. 11. He now expects Apple to report sales of eight million iPods, helping Apple reach US$3.9 billion in revenue and $0.43 in EPS (earnings per share). For Appleis 2005 fiscal year, which also ended last week, he has upped revenue and EPS to $14.2 billion and $1.51.
The analyst based those changes on checks with industry and channel sources, noting: “We believe distribution and retail have sourced and will continue to source significant channel fill of iPod nano in anticipation of strong holiday sales. While we are seeing this worldwide, it appears to be more pronounced in Japan and Europe, where design and small form factors are more valued than capacity.”
He added: “It appears that white 4GB iPod nano models have caught on, partially due to customers realizing that scratches on the white models are less visible.”
Mr. Wu also increased his fiscal year 2006 revenue and EPS numbers to $18.4 billion and $1.88, in addition to raising his 12-month stock target price to $48 from $45. While his target price is still below Appleis current share price, he explained in his report: “We reach $48 by applying a 20X multiple on our CY06 EPS of $1.93 and adding $9 in net cash.” (“CY” refers to the calendar year, which is different from Appleis fiscal year.)
He still rates the stock “Hold,” however, explaining: “Our concerns with its high valuation, INTC processor transition, slowing growth and high investor expectations remain.”
Piper Jaffray Weighs In
Meanwhile, Mr. Munster has also changed his iPod sales estimates based on iPod nano strength. He wrote: “Our nano estimates use our former iPod mini estimates as a base, but incorporate a slightly higher attach rate. Specifically, we assume that over the last few quarters and going forward, 80% of HDD iPods were the mini. With iPod mini units separated from other HDD iPods, we assume the nano sells 20% more units/quarter vs. our mini estimates.”
The analyst currently models nano shipments of 858,000 in September and five million in December, with overall iPod numbers increasing to 6.7 million for the quarter just ended and nine million next quarter. He said that he based his numbers on checks with sales channel sources, noting: “For the Sep. quarter, we assume supply constraints will limit nano units to be 10% greater than what we had expected for mini vs. 20% greater in future quarters.”
Mr. Munster added: “Our 20GB/60GB iPod estimates remain unchanged. For the shuffle, we are lowering our estimates by 10% going forward, assuming some cannibalization from nano.”
He also reiterated his “Outperform” rating on the stock, writing: “Given our confidence in December, we would be buyers going into the September quarter results, despite whisper number risk.” His target price continues to be $60 per share.
At 12:56 PM EST on Friday, Appleis shares were $50.83, down 1.68% for the day.
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