UBS ups Apple estimates on new product expectations

Posted:
in General Discussion edited January 2014
Analysts for investment bank UBS on Monday raised their estimates and price target on Apple Inc., citing better than expected sales of Macs this holiday season and upcoming product introductions that could include an ultra-portable notebook and pay-per-view movie service.



"Given general concerns about the economy, we are frankly surprised by the ongoing strength of the Mac franchise right now and the prospects (or 'builds') for new products we are hearing about for next year," analyst Ben Reitzes wrote in a research note. "With regard to the near-term, checks show very solid holiday demand, particularly with Macs, outpacing our prior expectations."



Reitzes, who along with his team recently surveyed over 30 Apple retail stores, said the "Mac phenomenon" should have a positive impact not only on the Cupertino-based company's systems hardware revenue, but also peripherals, software and overall company gross margins.



In the near term, the analyst anticipates that Apple chief executive Steve Jobs will use his January 15th keynote at the Macworld Expo in San Francisco to take the wraps off several new products and technologies which could include a "new iPhone model, an ultra portable PC platform, and even possibly a pay-per-view movie service" among other things.



"We first outlined the possibility of ultraportable devices from Apple in June 2006," he told clients. "However, it is important to note that we think these compelling ultra-portable Macs don?t seem to be adequately reflected in analyst models at this time."



As a result, Reitzes believes this new product category could make his estimates conservative over the long-term and help offset any potential slowdown in the iPod market due to market maturation and potential saturation of the digital media players in the US.



"Regarding features in the ultra-portable, we believe Apple would be looking at integrating the 'touch' capability from its iPhone into the ultra-portable device with Leopard obviously as the OS," the analyst wrote. "We believe Apple would only enter this market if its devices could be priced in the $1,500 range."



Meanwhile, Reitzes also speculates that the company's iPhone announcements next year could see a lower priced iPhone 'for the masses' make its debut alongside updated or 3G flagship models.



"Our checks continue to indicate solid demand in the US following the $200 price cut with significant interest into the holidays," he wrote. "Should Apple introduce another lower-priced iPhone in the $200-$250 range, we believe we could see another significant pop in unit sales not unlike what happened to the iPod when the mini was announced in 2004."



If Apple indeed takes this path, the analyst believes iPhone sales could actually be somewhat similar to the initial iPod pattern in terms of the first product only being one of many with demand stimulated later with follow-on releases at lower prices and with compelling designs.



"Perhaps at Macworld or shortly thereafter, we expect Apple to announce a lower-cost (or 'nano-like' option) along with a 3G option potentially coming later in 2008," he wrote.



Finally, Reitzes advised clients that his current iTunes estimates may prove conservative given the possibility that Apple could introduce a new "pay per view" movie service and additional content partners. His checks indicate that such a service using the company's digital rights management software -- with rental fees of around $2.99 to $3.99 -- is possible and could also work in helping entice additional movie content providers to join iTunes.



"In terms of new products, we believe Apple is working on improvements for Apple TV, perhaps adapting the concept a bit with the focus on advanced and increased networked storage for the home -- accessible by your Mac or PC or TV," the analyst added. "We also believe it is possible at some point for Apple to enter the HDTV flatscreen business, with built- in Apple TV?s and hard drives -- but that may be a 2009 or 2010 event."



For the current December quarter -- Apple's fiscal first of 2008 -- Reitzes now expects the company to earn $1.56 per share on sales growth of 32.5 percent to $9.42 billion, still factoring in iPod unit growth of 17 percent year-over-year and 2.1 million iPhones, but now including increased Mac unit growth of 40 percent yearly to 2.24 million units.



The analyst also raised his 12-month price target on Apple to $235 per share, up from $220.
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Comments

  • Reply 1 of 52
    bageljoeybageljoey Posts: 2,004member
    If it wasn't for analists, we would have no news...



    [Edit:]

    Actually, that was sarcastic, because these things never seem to say anything new.

    But I just noticed at the bottom the projected iTunes movie rental price of $3-$4. That would be awesome in my book! I hope they know what they are talking about...
  • Reply 2 of 52
    Quote:
    Originally Posted by Bageljoey View Post


    If it wasn't for analists, we would have no news...



    Generally true, but his guy actually seems to be sticking his neck out a bit more than the others, on the product side, with some fairly aggressive predictions -- ooops, I mean, speculation -- on likely introductions and time frames......
  • Reply 3 of 52
    I dunno. I think $3-4 is a bit steep for a virtual rental. That's what people pay for physical movie rentals, and you get all the extras included on the DVD. I think a $1.99 price point would make it an exceedingly attractive proposition for everyone except the most ardent torrent downloaders.



    Oh, and they really need to start making movie downloads HD. Even 720 would make most people happy, as probably 80+% of the market are not running 1080 TV's anyways.
  • Reply 4 of 52
    melgrossmelgross Posts: 33,510member
    Quote:
    Originally Posted by 11thIndian View Post


    I dunno. I think $3-4 is a bit steep for a virtual rental. That's what people pay for physical movie rentals, and you get all the extras included on the DVD. I think a $1.99 price point would make it an exceedingly attractive proposition for everyone except the most ardent torrent downloaders.



    Oh, and they really need to start making movie downloads HD. Even 720 would make most people happy, as probably 80+% of the market are not running 1080 TV's anyways.



    I remember seeing a survey a couple of years ago that showed that most people renting movies didn't view the extras, and that many people who bought movies didn't watch them either.



    Besides, people understand the concept of paying a bit more for convenience and speed.
  • Reply 5 of 52
    frank777frank777 Posts: 5,839member
    It's funny that these analysts are going gaga for all the fanboy stuff, like the ultraportable and the movie rental service.



    But the updated Mac Pro, which Apple will make real money on, is totally ignored in their 'outlook'.
  • Reply 6 of 52
    melgrossmelgross Posts: 33,510member
    Quote:
    Originally Posted by Frank777 View Post


    It's funny that these analysts are going gaga for all the fanboy stuff, like the ultraportable and the movie rental service.



    But the updated Mac Pro, which Apple will make real money on, is totally ignored in their 'outlook'.



    It isn't necessarily fanboy stuff. Most companies already have ultraportables, and there are many movie rental services online. This is already old news in the industry.



    They haven't mentioned the Mac Pro, because it won't be a NEW product, which is mostly what they're talking about, except for the iPhone, which is itself still pretty new, and a fairly hot, and important, new product catagory for Apple.



    I think we can all expect that Apple will make announcements for most, if not all, of their machines, at the very least, being upgraded to Penyrn.
  • Reply 7 of 52
    Quote:
    Originally Posted by 11thIndian View Post


    I dunno. I think $3-4 is a bit steep for a virtual rental. That's what people pay for physical movie rentals, and you get all the extras included on the DVD. I think a $1.99 price point would make it an exceedingly attractive proposition for everyone except the most ardent torrent downloaders.



    I'd pay $3-4 to rent a movie that I could watch on my iPod. Given a service like that, I'd very likely add an AppleTV to my setup. Besides, Microsoft is charging $6 for a rental, and that's in addition to the Live subscription. Granted their content is HD, but at that price, convenience is too steep.
  • Reply 8 of 52
    frank777frank777 Posts: 5,839member
    The Mac Pro will be brand new in 2008. It must be. It has not seen a real update to its chassis since 2003.



    And Penyrn, FW3200 and new displays will make it a more profitable upgrade than anything in the lineup.
  • Reply 9 of 52
    Quote:
    Originally Posted by 11thIndian View Post


    I dunno. I think $3-4 is a bit steep for a virtual rental. That's what people pay for physical movie rentals, and you get all the extras included on the DVD. I think a $1.99 price point would make it an exceedingly attractive proposition for everyone except the most ardent torrent downloaders.



    Oh, and they really need to start making movie downloads HD. Even 720 would make most people happy, as probably 80+% of the market are not running 1080 TV's anyways.



    I dunno, my digital cable provider (Rogers.com) charges $5.99 for a "virtua rental" when you view through their "Rogers on Demand" service off of Channel 100.



    I would be far more likely to consider renting my movie from Apple, via iTunes, if they were charging $3-4...especially considering I already have my Mac Mini connected directly to my flat panel HDTV via HDMI (if Canada gets this service out of the gate - which is doubtful).



    Just because there isn't a physical media to hold in your hands doesn't mean that the rental price should drop through the floor. Since movie distributers press as many copies of a DVD as they do, the bulk costs are very small...which translates into very little savings for consumers...even if that cost were to be knocked off the price of a rental.
  • Reply 10 of 52
    Quote:
    Originally Posted by melgross View Post


    I remember seeing a survey a couple of years ago that showed that most people renting movies didn't view the extras, and that many people who bought movies didn't watch them either.



    True

    Quote:

    Besides, people understand the concept of paying a bit more for convenience and speed.



    Exactly. I have netflicks, which is awesome. I love it.

    But it still happens sometimes that I am in the mood for something serious and put 2 heavy, subtitled movies at the top of my queue. Two days later, when they arrive, I may be in the mood for a light comedy--what do I do? I can send back the movies I got unwatched and hope I am in the right mood still 3 days later, or I can hold onto the movies and hope my mood changes back.

    I would pay more for convenience and speed--no doubt.

    (I have no desire ever to enter a Blockbuster again)
  • Reply 11 of 52
    MacProMacPro Posts: 19,718member
    Quote:
    Originally Posted by 11thIndian View Post


    I dunno. I think $3-4 is a bit steep for a virtual rental. That's what people pay for physical movie rentals, and you get all the extras included on the DVD. I think a $1.99 price point would make it an exceedingly attractive proposition for everyone except the most ardent torrent downloaders.



    Oh, and they really need to start making movie downloads HD. Even 720 would make most people happy, as probably 80+% of the market are not running 1080 TV's anyways.



    I agree and they can always add higher resolution as an option for those willing to wait longer that want it and as some have said, I'd even pay more. Be nice if they didn't expire for a week at least too.



    Side bar: I just caught the remake of Vertigo last night. A classic 1954 movie in high definition and full color, it was amazing to see. I realized there are movies I'd love to own too in Hi-Def. As more classics are restored and produced in high definition I think this is a market iTunes could be perfect for.
  • Reply 12 of 52
    Quote:
    Originally Posted by VertiGoGo View Post


    I dunno, my digital cable provider (Rogers.com) charges $5.99 for a "virtua rental" when you view through their "Rogers on Demand" service off of Channel 100.



    I would be far more likely to consider renting my movie from Apple, via iTunes, if they were charging $3-4...especially considering I already have my Mac Mini connected directly to my flat panel HDTV via HDMI (if Canada gets this service out of the gate - which is doubtful).



    Just because there isn't a physical media to hold in your hands doesn't mean that the rental price should drop through the floor. Since movie distributers press as many copies of a DVD as they do, the bulk costs are very small...which translates into very little savings for consumers...even if that cost were to be knocked off the price of a rental.



    I suppose what I say is more true for a sales vs rental market. And I totally agree that 90% of the market is has no interest in special features. Perhaps I'm more interested in Apple undercutting the illegal download market by offering convenience and quality at a great price.



    I as well hope this service is day and date launched in Canada, though I share your doubt. Though one hopes that TV shows on iTunes is a hopeful sign of things to come. Without move rentals, I'm in no hurry to purchase an ATV, and probably still not if the rentals aren't available in 720.
  • Reply 13 of 52
    melgrossmelgross Posts: 33,510member
    Quote:
    Originally Posted by Frank777 View Post


    The Mac Pro will be brand new in 2008. It must be. It has not seen a real update to its chassis since 2003.



    And Penyrn, FW3200 and new displays will make it a more profitable upgrade than anything in the lineup.



    I don't think it will be new now, at MacWorld.



    What I think is going to happen is that Intel will push Nehalen forward a month or three (their stuff seems to be ahead of schedule as of the past two years), and have it available for the ADC during the summer. THAT'S when I believe Apple will re-design the machine. It makes the most sense. Macworld has evolved into more a consumer event than the pro event it used to be with the ADC becoming such a major event in itself.



    Also, Nehalen will require a major re-design of the entire Mobo, which Penyrn doesn't. You know Apple, only make a major change when it's required. I doubt very much that we will see FW3200 as it isn't even scheduled to be approved until sometime first quarter.
  • Reply 14 of 52
    gqbgqb Posts: 1,934member
    The whole idea of 'time-based' rentals is antiquated. That whole model is based on physical media that only one person can have in possession at a time.



    Dilger has a good angle on it...

    http://www.roughlydrafted.com/2007/1...tunes-rentals/



    'Slot-based' rentals where you pay, say, $15/mo for 5 slots that you fill in any way you want. Keep on for a year if you want, turn other slots over daily.



    Who knows what pricing policies will evolve to encourage/discourage turnover or selection of lower-demand content.



    Think about content on Cable. If you watch 30 movies/day on Cable (assuming 2 premium channels), you're paying about $2 each. The trick for rentals will be to get economies of scale for rentals (i.e. ala Carte) that Cable companies get by pushing 400 channels of crap for the 4-5 channels you really want.
  • Reply 15 of 52
    gqbgqb Posts: 1,934member
    Quote:
    Originally Posted by Frank777 View Post


    It's funny that these analysts are going gaga for all the fanboy stuff, like the ultraportable and the movie rental service.



    But the updated Mac Pro, which Apple will make real money on, is totally ignored in their 'outlook'.



    So now 'fanboy' means not just enthusiastic Mac users, but Mac users who are not enthusiastic about the same models as you.

    Can we now just retire this most stupid of ad-hominems?



    As for which models will make Apple the most money, as a AAPL stockholder, I think they're making their choices just fine, thank you.
  • Reply 16 of 52
    jeffdmjeffdm Posts: 12,951member
    Quote:
    Originally Posted by VertiGoGo View Post


    Just because there isn't a physical media to hold in your hands doesn't mean that the rental price should drop through the floor. Since movie distributers press as many copies of a DVD as they do, the bulk costs are very small...which translates into very little savings for consumers...even if that cost were to be knocked off the price of a rental.



    I really don't see the point in paying more than $2 a rental though. When it comes down to it, I pay less than that. Maybe half of that is packaging, postage and handling.



    Given that Apple doesn't have to finance high-square-foot retail facilities in high rent districts to display movies, much of the retailer mark-up isn't necessary. They generally use lower sq-ft facilities to market much more expensive products instead, and the media stuff is web based, which really cuts down on a lot of different expenses. If it's $2/rental through Apple, the studio would probably get about $1.50. I don't think studios get royalties for DVD rentals anymore, so what the studio gets per rental effectively goes down every time a movie is rented.
  • Reply 17 of 52
    Quote:
    Originally Posted by JeffDM View Post


    I really don't see the point in paying more than $2 a rental though. When it comes down to it, I pay less than that. Maybe half of that is packaging, postage and handling.



    Given that Apple doesn't have to finance high-square-foot retail facilities in high rent districts to display movies, much of the retailer mark-up isn't necessary. They generally use lower sq-ft facilities to market much more expensive products instead, and the media stuff is web based, which really cuts down on a lot of different expenses. If it's $2/rental through Apple, the studio would probably get about $1.50. I don't think studios get royalties for DVD rentals anymore, so what the studio gets per rental effectively goes down every time a movie is rented.



    I have no idea of the money involved in such things, but I can speculate that an ultra high bandwith distribution center with servers and storage might be more expensive to set up and maintain than a DVD production factory. Sure there is no packaging and shipping, but there would still be costs. You would probably have to carry tech support too--which isn't needed for physical DVDs.

    I don't know what a "fair" price would be (I don't even know what that would mean).

    I do not know how much it would cost Apple to set up and maintain these facilities.



    But I do know that there would be studio participation in the costs. Bearing that in mind, I cannot imagine $2 rentals any time soon, if ever.
  • Reply 18 of 52
    jeffdmjeffdm Posts: 12,951member
    Quote:
    Originally Posted by Bageljoey View Post


    But I do know that there would be studio participation in the costs. Bearing that in mind, I cannot imagine $2 rentals any time soon, if ever.



    I that's probably the most pressing barrier. If they push for the $4-$5 rentals like they did with the original DivX format, then it's over for an Apple rental service as far as I'm concerned. But Netflix offers streaming movie rentals at no extra cost above the regular subscription, they just don't have is a set-top box or portable devices.
  • Reply 19 of 52
    Quote:
    Originally Posted by GQB View Post


    Think about content on Cable. If you watch 30 movies/day on Cable (assuming 2 premium channels), you're paying about $2 each. The trick for rentals will be to get economies of scale for rentals (i.e. ala Carte) that Cable companies get by pushing 400 channels of crap for the 4-5 channels you really want.



    If you have 2 premium channels ($10-$15/month each where I live) you're not going to get close to 30 movies a day; at best, 5 or 6, since they repeat the same films multiple times in a day.



    Even at 3 movies a day x 2 channels = 6 movies x 30 days/month (avg) = 180 movies a month for maximum cost of $30/month (2 x $15 each channel) = about $0.17 per movie.



    And that doesn't take into account the 15 or 20 other channels of the 400 they provide that I like regardless of the other crap.



    I've done the math in my area, and I can't rent the volume of movies (even from RedBox at $1 per DVD) for lower cost than the selection I can get from my cable provider.



    Unfortunately, the selection seems to get worse and worse. Thankfully, the premium channels do manage to provide some other content (series and specials) that I enjoy to take up the slack.
  • Reply 20 of 52
    melgrossmelgross Posts: 33,510member
    Quote:
    Originally Posted by GQB View Post


    The whole idea of 'time-based' rentals is antiquated. That whole model is based on physical media that only one person can have in possession at a time.



    Dilger has a good angle on it...

    http://www.roughlydrafted.com/2007/1...tunes-rentals/



    'Slot-based' rentals where you pay, say, $15/mo for 5 slots that you fill in any way you want. Keep on for a year if you want, turn other slots over daily.



    Who knows what pricing policies will evolve to encourage/discourage turnover or selection of lower-demand content.



    Think about content on Cable. If you watch 30 movies/day on Cable (assuming 2 premium channels), you're paying about $2 each. The trick for rentals will be to get economies of scale for rentals (i.e. ala Carte) that Cable companies get by pushing 400 channels of crap for the 4-5 channels you really want.



    Well, I mean, really! Who is going to watch 30 movies a day, even if they were available? That's 60 hours of programming a day!



    Even the most rabid of movie addicts can't watch much more than 3 movies a day. unless they're unemployed, and living in their parents home, who has the time?



    At least use realistic numbers.



    Otherwise, your argument makes sense.
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