Apple shares move higher as Prudential lifts earnings outlook
Shares of Mac maker Apple Inc. rose over 3 percent in morning trading on the Nasdaq stock market following a report from Prudential, which offered a rosy outlook on the company's March fiscal quarter.
"Our recent checks with industry contacts suggest a solid March quarter with seasonal iPod unit weakness being more than offset by stronger Mac sales and higher margins due to a favorable component cost environment," analyst Jesse Tortora told his clients.
The analyst, who just returned from a meeting with members of Apple's leadership, said he's seeing "a big drop" in sales of the company's video iPod and iPod post holidays, but that those weaker sales have been partially offset by stronger sales of the new color iPod shuffles.
Tortora's bullish outlook for Apple was similarly fortified by flowing Mac sales, which are reportedly tracking ahead of company expectations despite the recent introduction of rival Microsoft's Windows Vista operating system.
"We believe Macs would even be stronger in the quarter, but sales of Mac Pro and MacBook Pro are weaker due to a pause ahead of Adobe?s Creative Suite 3 release, expected in the June quarter," he wrote.
For the three-month period ending March, Tortora reduced his iPod estimate to 9.9 million units from 10.4 million, but bumped his Mac estimate to 1.6 million units from 1.45 million.
"Fundamentals at Apple appear sound," the analyst wrote. "We believe that margins will continue to benefit from a favorable component cost environment; Mac share gains will continue; and that the iPod weakness is explained by normal consumer seasonality."
Although Tortora maintained his his 'Neutral Weight' rating on the company, he increased his March quarter per-share earnings estimates by $0.04 to $0.68, or about $0.07 ahead of Street consensus to reflect stronger Mac sales and higher gross margins. Apple has been guiding earnings for the quarter of about $0.54 to $0.56 per share.
Shares of the Cupertino-based company were trading up $2.80, or 3.26 percent, just before noon eastern time.
"Our recent checks with industry contacts suggest a solid March quarter with seasonal iPod unit weakness being more than offset by stronger Mac sales and higher margins due to a favorable component cost environment," analyst Jesse Tortora told his clients.
The analyst, who just returned from a meeting with members of Apple's leadership, said he's seeing "a big drop" in sales of the company's video iPod and iPod post holidays, but that those weaker sales have been partially offset by stronger sales of the new color iPod shuffles.
Tortora's bullish outlook for Apple was similarly fortified by flowing Mac sales, which are reportedly tracking ahead of company expectations despite the recent introduction of rival Microsoft's Windows Vista operating system.
"We believe Macs would even be stronger in the quarter, but sales of Mac Pro and MacBook Pro are weaker due to a pause ahead of Adobe?s Creative Suite 3 release, expected in the June quarter," he wrote.
For the three-month period ending March, Tortora reduced his iPod estimate to 9.9 million units from 10.4 million, but bumped his Mac estimate to 1.6 million units from 1.45 million.
"Fundamentals at Apple appear sound," the analyst wrote. "We believe that margins will continue to benefit from a favorable component cost environment; Mac share gains will continue; and that the iPod weakness is explained by normal consumer seasonality."
Although Tortora maintained his his 'Neutral Weight' rating on the company, he increased his March quarter per-share earnings estimates by $0.04 to $0.68, or about $0.07 ahead of Street consensus to reflect stronger Mac sales and higher gross margins. Apple has been guiding earnings for the quarter of about $0.54 to $0.56 per share.
Shares of the Cupertino-based company were trading up $2.80, or 3.26 percent, just before noon eastern time.
Comments
BUY! BUY! BUY!
The analyst, who just returned from a meeting with members of Apple's leadership, said he's seeing "a big drop" in sales of the company's video iPod and iPod post holidays, but that those weaker sales have been partially offset by stronger sales of the new color iPod shuffles.
That's nothing to worry about because the sales are very seasonal. It's been a couple years since they had continuous increases in iPod sales. Last year, post-holiday was something 40% lower than the holiday, but it was still a lot better than the same quarter, year before. So long as the year-over-year numbers are still improving, the seasonal fluctuations won't be a problem.
I think Adobe CS3 is more critical... and that's going to be earlier than analysts think!
BUY! BUY! BUY!
Yeah, I have a hard time believing that PhotoShop World in Boston April 4-6 is going to be happening without a CS3 version to hype. And the beta is not enough for that show. I expect CS3, sans the video editing apps (Adobe said those would come out this summer), to be announced before or at the show with shipping about the same time.
That's my trigger.
CS3 = Mac Pro for me!
Looks though like Leopard, CS3 will be launched by earnings report by Apple in early/mid-April. A deadly synergy to kick the stock up past $95 in a small frenzy going into what will clearly be a very strong April-May-June 2007 quarter. Time for some big ass pro sales with CS3 out... Software sales with Leopard, and across-the-board Mac sales with Leopard for people wanting to get Leopard with their new Macs.
It's cool, now that it is becoming very clear how conservative Apple's outlook was for Jan-Feb-March the stock price should be back on the upward track. And it's only data from mid-Feb. Also there were a lot of jitters about Vista, but seeing it's just a Tiger 10.4.x ripoff, people are looking back on the bigger (if smaller market share) Mac picture.
And Vista SUCKS ASS for PC Gaming. Seriously. Blame the nVidia drivers or whatever, it SUCKS ASS. This will hold off consumer/enthusiast market for a while. Well, dampen vista sales somewhat... ....hopefully
I think Adobe CS3 is more critical... and that's going to be earlier than analysts think!
BUY! BUY! BUY!
They are probably going to go up for a while. Provided they get Leopard out soon! That's the hitch/risk.
Leopard and CS3 and Mac sales should see some quite impressive synergy - announced mid-end of March, shipping in volume in April, to kick-start the April-May-June 2007 quarter. Apple and Adobe wants to get everything right, Adobe needs to recoup its investment in a serious way by getting a ton of Mac software sales. Apple wants to sort Leopard and Mac platform, as this will be the key to Leopard Lite in iPhone, etc. going into 2nd half of 2007, up to mid-2008.
Leopard is the key to Apple, Inc. Cleaning up the foundation to run on PPC 32bit, PPC 64bit, Intel 32bit, Intel 64bit, ARM, Intel, etc. and scaling down appropriately for the mobile devices/ subnotebook/ iPhone/ etc.
Yeah, I have a hard time believing that PhotoShop World in Boston April 4-6 is going to be happening without a CS3 version to hype. And the beta is not enough for that show. I expect CS3, sans the video editing apps...
This makes very good sense. They should be demoing the final shipping CS3 by then. 8)
This makes very good sense. They should be demoing the final shipping CS3 by then. 8)
I have good reasons to believe that.
If Apple does sell another 1.6 million Macs this quarter, with slow Mac Pro and MBP sales, they would be on track for a 7 million sales year, as the next two quarters ratchet sales up further.
I have good reasons to believe that.
If Apple does sell another 1.6 million Macs this quarter, with slow Mac Pro and MBP sales, they would be on track for a 7 million sales year, as the next two quarters ratchet sales up further.
As much as I hate analysts stirring things up, yeah, let's call this point (since APPL is back at about $90).... Let's say,
LADIES AND GENTLEMEN, START YOUR ENGINES. 2007 IS READY FOR LAUNCH. NO FRIGGIN AROUND. 8)
(Cisco and Apple deal, Prudential boost, and heck, no products or financials announced yet!)
IT BEGINS.... End of March to clear all announcements, April shipping, strong 1st calendar half 2007,
then...... iPhone.... Phew. It's gonna be big.
Hmmm.. how fickle the market is. Everyone seems to have forgotten about the backdating options thing.
"Oh yeah, that...", one may say
It begins... AAPL up almost 2% to $90.80 at this stage. IT BEGINS....
(Cisco and Apple deal, Prudential boost, and heck, no products or financials announced yet!)
IT BEGINS.... End of March to clear all announcements, April shipping, strong 1st calendar half 2007,
then...... iPhone.... Phew. It's gonna be big.
Hmmm.. how fickle the market is. Everyone seems to have forgotten about the backdating options thing.
"Oh yeah, that...", one may say
The backdating problem has already discounted the stock. Without that, the stock would be sitting in the high 90's. You will see the bounce if the gov. doesn't open a case against Apple and Jobs, and just goes after the other executives, if it even does that.
If it opens a case, then there will be a big drop from here.
The backdating problem has already discounted the stock. Without that, the stock would be sitting in the high 90's. You will see the bounce if the gov. doesn't open a case against Apple and Jobs, and just goes after the other executives, if it even does that.
If it opens a case, then there will be a big drop from here.
What you are saying is the "current" situation is priced into the stock. If this situation is cleared fully, then AAPL is ready to ramp up significantly this year.
But the downside risk remains, I see... There are two major parties involved. The FBI San Francisco, and the SEC [??correct??]. It is somewhat of a cloud hanging over the stock, which sucks... for shareholders and the company. But these investigations move so slowly, I wonder if a true "resolution" will be found by the end of the year. And how the FBI interacts with the SEC, well, I don't know how these things work.
I think Fred Anderson and Nancy Heinen will be taken down. That is, charged and tried. Jobs and others, safe. Well, just my prediction.
Good points mate.
What you are saying is the "current" situation is priced into the stock. If this situation is cleared fully, then AAPL is ready to ramp up significantly this year.
But the downside risk remains, I see... There are two major parties involved. The FBI San Francisco, and the SEC [??correct??]. It is somewhat of a cloud hanging over the stock, which sucks... for shareholders and the company. But these investigations move so slowly, I wonder if a true "resolution" will be found by the end of the year. And how the FBI interacts with the SEC, well, I don't know how these things work.
I think Fred Anderson and Nancy Heinen will be taken down. That is, charged and tried. Jobs and others, safe. Well, just my prediction.
Good points mate.
You've pretty much got it.
It's hard to say what will happen to Anderson and Heinen. It depends on just what they did, and whether they benefited. They could be fined, and barred from being on company boards (as well as executive positions), or they could plead out, or it could go to trial.