Report: Apple ups Mac orders by 20 percent, scales back on iPods
Following a series of checks with sources in the Far East, researchers for Banc of America have put out a call indicating that Apple has commissioned a significant increase in production of Macs for the current quarter while simultaneously reducing iPod production.
"We continue to believe that desktops and notebooks are the key driver of the Apple story," analyst Scott Craig wrote in a report to clients Friday. "Both desktop and notebook production numbers have moved up by 20%+ from expectations in early January, indicating potentially solid demand thus far in the March quarter, as well as some inventory replenishment."
He added that his checks suggest Mac production numbers will continue to rise throughout the quarter, and that MacBook Air production has also increased slightly since mid-January.
At the same time, however, the analyst noted that iPod production numbers for the March quarter "appear to have been significantly reduced, down 10–20% from early January and down 30%+ from early December."
The magnitude of those cuts, coupled with only modest iPod unit growth reported in the December quarter, indicate that Apple's digital media player business may struggle to show meaningful unit growth during the 2008 calendar year.
"Current production expectations for March imply a 5–10% year-over-year unit decline, versus our expectation for 5% year-over-year unit sales growth during the March quarter, likely implying a continuing inventory rightsizing and sales sluggishness," he wrote.
As a result, Craig reduced his iPod unit assumptions for the quarter while raising average selling price (ASP) assumptions to account for robust sales of the higher-priced iPod touch models. That said, the analyst advised clients that he believes Apple cannot risk maintaining its current ASPs for much longer and will inevitably be forced to cut iPod pricing across the board.
Meanwhile, the Banc of America analysts also used his not to add corroboration to on-again off-again reports of severe iPhone cuts, which reportedly took place in both December and March. Those cuts, however, have since reportedly "bounced" back.
"[Still], we remain concerned that iPhone production and demand are lackluster," he explained. "After several data-points in December and early January indicated large production cuts of 50%+ to iPhone production for the March quarter, our recent checks reveal that production levels are 40–55% higher for [the first calendar quarter of 2008], than the recent cuts originally suggested, although still down significantly from two months ago."
Therefore, Craig said, the introduction of a 3G handset in the second half of the year and further price reductions on the first generation iPhone are critical to achieving the company’s 10 million unit expectation for calendar year 2008.
In general, the analyst summarizes the current state of Apple's shares as 'oversold and undervalued.'
"We would be buyers of the stock at these levels, given our Asian checks on Mac production, and especially given we believe the main driver for the company and its stock near-term is notebooks and desktops," he wrote. "With the stock currently trading at 21 times our “cash” earnings-per-share estimate for fiscal 200, relative to a 4-year median multiple of 32 times (and typically 25+), we view the risk-return profile as more compelling following the sell-off post December quarter earnings."
"We continue to believe that desktops and notebooks are the key driver of the Apple story," analyst Scott Craig wrote in a report to clients Friday. "Both desktop and notebook production numbers have moved up by 20%+ from expectations in early January, indicating potentially solid demand thus far in the March quarter, as well as some inventory replenishment."
He added that his checks suggest Mac production numbers will continue to rise throughout the quarter, and that MacBook Air production has also increased slightly since mid-January.
At the same time, however, the analyst noted that iPod production numbers for the March quarter "appear to have been significantly reduced, down 10–20% from early January and down 30%+ from early December."
The magnitude of those cuts, coupled with only modest iPod unit growth reported in the December quarter, indicate that Apple's digital media player business may struggle to show meaningful unit growth during the 2008 calendar year.
"Current production expectations for March imply a 5–10% year-over-year unit decline, versus our expectation for 5% year-over-year unit sales growth during the March quarter, likely implying a continuing inventory rightsizing and sales sluggishness," he wrote.
As a result, Craig reduced his iPod unit assumptions for the quarter while raising average selling price (ASP) assumptions to account for robust sales of the higher-priced iPod touch models. That said, the analyst advised clients that he believes Apple cannot risk maintaining its current ASPs for much longer and will inevitably be forced to cut iPod pricing across the board.
Meanwhile, the Banc of America analysts also used his not to add corroboration to on-again off-again reports of severe iPhone cuts, which reportedly took place in both December and March. Those cuts, however, have since reportedly "bounced" back.
"[Still], we remain concerned that iPhone production and demand are lackluster," he explained. "After several data-points in December and early January indicated large production cuts of 50%+ to iPhone production for the March quarter, our recent checks reveal that production levels are 40–55% higher for [the first calendar quarter of 2008], than the recent cuts originally suggested, although still down significantly from two months ago."
Therefore, Craig said, the introduction of a 3G handset in the second half of the year and further price reductions on the first generation iPhone are critical to achieving the company’s 10 million unit expectation for calendar year 2008.
In general, the analyst summarizes the current state of Apple's shares as 'oversold and undervalued.'
"We would be buyers of the stock at these levels, given our Asian checks on Mac production, and especially given we believe the main driver for the company and its stock near-term is notebooks and desktops," he wrote. "With the stock currently trading at 21 times our “cash” earnings-per-share estimate for fiscal 200, relative to a 4-year median multiple of 32 times (and typically 25+), we view the risk-return profile as more compelling following the sell-off post December quarter earnings."
Comments
PS: I'm pissed I didn't get in Yahoo when I first caught wind of this potential buyout from MS.
If this bank wants to avoid being seen as another American company which is fleeing its American roots, it had better be reminded that bank is spelled with a "k" in English. If it wants to have a French name, maybe it ought to move there. Maybe is has.
"Banc of America Securities LLC (BAS), based in New York City, is the investment banking subsidiary of Bank of America."
? http://en.wikipedia.org/wiki/Banc_of_America_Securities
It makes sense for iPhone sales to lag over the next 4 months ahead of the 3G iPhone. Fortunately, Mac sales will help make up the difference. There's also the deferred revenue to consider.
My target EPS for this quarter is $1.20. Apple estimated .94 and the Street average is $1.04.
AAPL is way oversold and definitely a strong buy here.
If this bank wants to avoid being seen as another American company which is fleeing its American roots, it had better be reminded that bank is spelled with a "k" in English. If it wants to have a French name, maybe it ought to move there. Maybe is has.
Perhaps a little due diligence is required on your part. Banc of America, whose full name is Banc of America Securities is the investment banking subsidiary of Bank of America. Nothing more. Nothing less.
Update: I see Solipsism beat me on this. That will teach me to answer the phone.
If this bank wants to avoid being seen as another American company which is fleeing its American roots, it had better be reminded that bank is spelled with a "k" in English. If it wants to have a French name, maybe it ought to move there. Maybe is has.
In French you spell Bank "BANQUE". "Le banc" is a bench like in park bench.
So right now this company would be -if any- the Bench of America
In French you spell Bank "BANQUE". "Le banc" is a bench like in park bench.
So right now this company would be -if any- the Bench of America
Bank does come from the word bench so it's an understandable mistake.
Bank does come from the word bench so it's an understandable mistake.
Point taken - but the origins are in Italy this time from the word Banca - the bench where the money 'operators' used to sit on at the time (14th century and earlier)
The french word derived from this one. and that probably goes even further back to the roman empire, which in turn probably copied the old egyptians and/or the traders in the temple.
Anyway - enough of this back to more serious things
Perhaps a little due diligence is required on your part. Banc of America, whose full name is Banc of America Securities is the investment banking subsidiary of Bank of America. Nothing more. Nothing less.
Update: I see Solipsism beat me on this. That will teach me to answer the phone.
I was aware of the spelling differentiation between the subsidiary and the parent company. But that was not the point. My comment addresses the need they seem to have to employ, let's call it "Frenchified" or non-English spelling to be more correct, such a name for what is supposed to be an American company. God knows were are exporting enough jobs to other countries, and re-naming good old American ones with foreign sounding names just rubs salt in the wounds. So what if it's an investment bank subsidiary, it's still in New York isn't it? Banc just sounds to precious and pretentious for an American company, doesn't it?
Oh, and before some nit-picking historian out there chimes in about my assertion at it is an "all-American company", I know that BofA was founded in San Francisco as the The Bank of Italy by the Giannini family. But they were Italian-American. My father told me that story years ago, I didn't get it from a quick trip to Google.
Sorry, just feeling bitchy and crusty today.
Ya know, maybe they wouldn't have to cut iPhone production if it was for sale in a few more countries...
That's the one thing I find that is always lacking from these talks I've been hearing about iPhone sales projections for '08.
I would be very surprised if Apple DOESN'T start selling iPhones in more than a couple new countries this year (Canada, Italy, Japan, are some of the heavily rumored "next stops").
PS: I'm pissed I didn't get in Yahoo when I first caught wind of this potential buyout from MS.
Buying Yahoo on its own merits would have been suicidal, and buying based on a potential buyout would have required psychic abilities (or inside info).
Only ones to benefit were inside traders (who don't deserve their gains) and long-term holders (who do.)
I was aware of the spelling differentiation between the subsidiary and the parent company. But that was not the point. My comment addresses the need they seem to have to employ, let's call it "Frenchified" or non-English spelling to be more correct, such a name for what is supposed to be an American company. God knows were are exporting enough jobs to other countries, and re-naming good old American ones with foreign sounding names just rubs salt in the wounds. So what if it's an investment bank subsidiary, it's still in New York isn't it? Banc just sounds to precious and pretentious for an American company, doesn't it?
Oh, and before some nit-picking historian out there chimes in about my assertion at it is an "all-American company", I know that BofA was founded in San Francisco as the The Bank of Italy by the Giannini family. But they were Italian-American. My father told me that story years ago, I didn't get it from a quick trip to Google.
Sorry, just feeling bitchy and crusty today.
In the United States, a financial business can only be called a "Bank" if it is, in fact, a bank.
As others have pointed out, the business called "Banc of America Securities" is the investment banking subsidiary of Bank of America, and is not, technically, a bank.
As for the spelling being Frenchy. Whatever.
In the United States, a financial business can only be called a "Bank" if it is, in fact, a bank.
As others have pointed out, the business called "Banc of America Securities" is the investment banking subsidiary of Bank of America, and is not, technically, a bank.
As for the spelling being Frenchy. Whatever.
Thanks for that. It least it makes some sense out of it for me.
Ya know, maybe they wouldn't have to cut iPhone production if they just sold it in a few more countries...
Or sold it UNLOCKED.
the real money with phones is in the contract not the phone anyway.
That may be true for giveaway phones, but when you sell them at $400 a pop, and you do much of it directly (not through carriers), I'd call that real money. Besides, Apple's model is to come out with something even better year after year, so those buyers will be repeat customers. Apple has reinvented the phone business, not just the phone.
I've done my job here on earth, now, and have converted a load of unbelievers to the sweet side. Why did it take so long? I wonder if a 20% increase in Mac orders is ENOUGH?
Sorry, just feeling bitchy and crusty today.
And more than a little bit xenophoibic.