Citigroup weighs in on Leopard, 3G iPhone, and new iPod nanos

[AppleInsider]

Analysts at Citigroup are recommending that investors buy shares of Apple Inc. ahead of upcoming product launches, which they say will include Mac OS X Leopard, a touch-screen video iPod, higher capacity iPod nanos and a 3G version of the iPhone.

Leopard

As part of an in-depth company overview released to clients earlier this week, analyst Richard Gardner and his team said they expect Mac OS X "Leopard" to launch on June 11 at the company’s Worldwide Software Developers Conference in San Francisco. They estimate the release will generate between $50 and $75 million in incremental revenue per quarter for Apple during its first few quarters on the market, boosting the company's per-share earnings by about a nickel with its attractive 85 percent gross margin.

iPhone and iPhone 3G

Based on Gardner's checks, iPhone will follow the launch of Leopard in "late-June." The analyst told clients the device is likely to deliver more attractive economics than Wall Street is expecting, giving Apple's willingness to work exclusively with Cingular and its sticky, high-revenue subscriber based.

"We believe that Apple could receive as much as $200-300 per new subscriber from Cingular in up-front payments and residuals (depending on whether the phone is sold in Apple’s own stores or Cingular’s stores)," he wrote. "This is roughly 2-3X the payment that the Street currently expects and provides Apple with significant flexibility to drop prices or earn higher margins. We also expect Apple to release a 3G version of iPhone during [the first half of 2008]."

iPods and Mac notebooks

Gardner also told clients to keep a look out for new iPod models beginning in the fall, including a 12-16GB nano priced at $249 and a video iPod with the same touch screen as the iPhone priced at $250-400. "These products should launch in August or September and position Apple well for the peak Holiday 2007 selling season," he wrote. "Finally, we expect a newly redesigned MacBook Pro in the Fall, new iterations of all Apple laptops featuring Intel’s new Santa Rosa platform in the Summer or early Fall, and perhaps an ultra-portable laptop at some point this year."

Short-term share volatility

Given the robustness of Apple’s product pipeline between now and yearend, the Citigroup analyst said he remains comfortable with his well above-consensus EPS and revenue estimates of $24.6 billion and $3.48 for fiscal 2007. However, he told clients he would not be surprised to see shares of the Cupertino-based company retrace a portion of their recent gains later this month, "as shorter-term investors prepare for a 2-month news vacuum between [second quarter] earnings and the Worldwide Developers Conference keynote on June 11."

Second quarter preview

Citigroup is modeling for solid fiscal second quarter results from Apple when it reports on April 25th, with revenue and unit shipments generally aligning with the current sell-side consensus. Gross margins, however, should come in well above consensus at 32 percent or more, Gardner said. As a result, he increased his per-share earnings estimate to 73 cents, up from 71 cents and the Street consensus of 63 cents.

The analyst said his checks turned up no evidence of a slowdown in Mac purchases ahead of Leopard and he expects Apple to report sales of around 1.45 million Macs during the quarter, representing 30 percent year-over-year growth. Similarly, iPods sales are expected to grow 27 percent to 10.8 million units. "While this is slightly below our prior estimate of 11.5 million units, it is generally in line with consensus of 11.0 million," he explained. "The mix of U.S. iPod sales appears very consistent with that of the prior quarter (30-35 percent video, 40-45 percent nano and 20-25 percent nano)."

Looking ahead to Apple's fiscal third quarter, Gardner believes Apple will continue its historical trend of guiding conservatively, calling for revenues to be “flat to up modestly sequentially” from the second quarter. However, the analyst said he is sticking with his above-consensus revenue estimate of $5.6 billion as he expects the company to benefit from a full quarter of Apple TV sales, the shipment of Leopard, and iPhone channel fill for Cingular retail stores.

"Despite the recent rise in Apple shares from $83 to $94, we continue to like the shares ahead of new product introductions beginning in June," Gardner told clients. "We would buy any 'sell the news' dips following earnings."

[ View this article at AppleInsider.com ]

[solipsism]

This is all the same stuff we talk about on this website. We should create the Apple Insider Analyst Group (AIAG) and start making money with our own predictions.

[mgkwho]

Well, it's nice to know that these "checks" are based off of rumor sites.

I disagree with a lot of it; after all, it is just speculation right? It's not as if these 'analysts' have any inside information.

-=|Mgkwho

[jasonfj]

What does "We would buy any 'sell the news' dips following earnings" mean?

[onlooker]

Originally Posted by mgkwho

Well, it's nice to know that these "checks" are based off of rumor sites.

I disagree with a lot of it; after all, it is just speculation right? It's not as if these 'analysts' have any inside information.

-=|Mgkwho

Even funnier is that Apple goes down right after announcements because of these people. Everybody wonders why AAPL drops after an announcement. It's short term investors. When they buy right before the launch and it builds up to the release date, everybody will sell off at the release to beat the drop from everybody else selling off. But they do make money doing it. It just goes down. What I can't understand is why everybody is so dumbfounded by the fact that AAPL drops right after a launch when it's obvious. There are articles all over the net saying buy AAPL before XxXxXxX release. EVerybody knows the rules = buy low, Sell High.

[orange whip]

Originally Posted by jasonfj

What does "We would buy any 'sell the news' dips following earnings" mean?

The herd mentality of investors is to sell shares just following announcements as they believe the the 'drought' of news that follows an earnings anouncement is all doom and gloom (a self fulfilling FUD atmosphere). The herd tends to buy shares when they are up and sell when they are down. Make sense?... not to me either..... Smart investors buy when the shares are down and sell when they are up..... and that is how you make money.It is a contrarian position as it is contrary to the herd direction. This is a somewhat simplistic appraisal of the market, but a good starting point.

[Ireland]

Originally Posted by AppleInsider

iPhone and iPhone 3G

We also expect Apple to release a 3G version of iPhone during [the first half of 2008].

They better release only a 3G version in Europe.

[willrob]

Originally Posted by mgkwho

I disagree with a lot of it; after all, it is just speculation right? It's not as if these 'analysts' have any inside information.

-=|Mgkwho

They do get one-on-one talks with Apple occasionally. But generally they make pronouncements which most alert Apple investors/users already know.

Buying on dips requires recognizing the low point; and selling for the most profit requires estimating where that peak will be. A lot of investors take advantage of those sudden highs that occur during the earnings report and sell; which of course sends the stock down the next day, if not immediately while the reports is still being given.

There's also that beware of weak guidance moment, when the enthusiastic peak collapses. This happened in January's report, as some of you may remember.

[Mr. H]

Originally Posted by Ireland

They better release only a 3G version in Europe.

Hmmm, a slightly odd idea given GSM is cheaper and more wide-spread, don't you think?

[Mr. H]

Originally Posted by AppleInsider

"Finally, we expect a newly redesigned MacBook Pro in the Fall, new iterations of all Apple laptops featuring Intel’s new Santa Rosa platform in the Summer or early Fall

No new MacBook Pro until autumn? No Santa-Rosa until summer at the earliest? Um, no, try again.

I'm still expecting May or June for the new MacBook Pro, assuming Intel don't miss their May ship date for Santa Rosa.

[Hattig]

Hmmm, a slightly odd idea given GSM is cheaper and more wide-spread, don't you think?

3G phones fall back to GSM in non-3G areas.

I think he meant that for the price, they'd better not offer a GSM-only option, not that the phone would not have fall-back to GSM.

[thebeat]

i wonder if it would be re-designed though. I think a lot of this info is false

[Rolo]

I don't see why we can't get new MBPs this spring and another crop in November. If there isn't a new Santa Rosa MBP shipping with Leopard by June 11, I'll be really disappointed.

[desarc]

we should all buy apple stock because they're going to release new hardware and software in the future.
brilliant.

[solipsism]

Santa Rosa will be EFI, not BIOS. How does this work with OEM using WIndows?

http://en.wikipedia.org/wiki/Centrin...orm_.282007.29

[Tofino]

Originally Posted by solipsism

Santa Rosa will be EFI, not BIOS. How does this work with OEM using WIndows?

http://en.wikipedia.org/wiki/Centrin...orm_.282007.29

isn't it EFI already in the intel macs?

[solipsism]

Originally Posted by Tofino

isn't it EFI already in the intel macs?

Yes it is.

[TheNipponese]

Originally Posted by Ireland

They better release only a 3G version in Europe.

Agreed. Making an EDGE device was really pretty bad on their part. Not only are they blocking out most of Europe and ALL of Japan, but the data comm is already obsolete by US smart-phone standards. It's a good thing most of the US public is too stupid to know the advantages of 3G over EDGE.

On the other hand, Cingular's marketing has done amazing job at obscuring the difference.

[Ireland]

Originally Posted by TheNipponese

Agreed. Making an EDGE device was really pretty bad on their part. Not only are they blocking out most of Europe and ALL of Japan, but the data comm is already obsolete by US smart-phone standards. It's a good thing most of the US public is too stupid to know the advantages of 3G over EDGE.

On the other hand, Cingular's marketing has done amazing job at obscuring the difference.

The US has way more WiFi hot spots than 3G signals, that's why they went with Egde. Europe is a different kettle of fish.

[melgross]

When looking for the new Santa Rosa's, don't forget how long it took for Apple to use the Cloverton. Everyone was complaining about that. Then we suddenly see why.

There is no telling if Apple will use Santa Rosa the day it comes out.

[JeffDM]

Originally Posted by Mr. H

No new MacBook Pro until autumn? No Santa-Rosa until summer at the earliest? Um, no, try again.

I'm still expecting May or June for the new MacBook Pro, assuming Intel don't miss their May ship date for Santa Rosa.

While I don't think anything about the Clovertown delay applies to the notebook platforms, keep in mind that Apple took a month or two to get Core2Duo into their notebook systems after C2D notebooks were announced. The delay to Mac Pro was about two months after the C2D-based Xeons were supposedly made available.

[noirdesir]

Originally Posted by JeffDM

The delay to Mac Pro was about two months after the C2D-based Xeons were supposedly made available.

And about two months BEFORE the 3 GHz C2D-based Xeons will become available.

[melgross]

Originally Posted by JeffDM

While I don't think anything about the Clovertown delay applies to the notebook platforms, keep in mind that Apple took a month or two to get Core2Duo into their notebook systems after C2D notebooks were announced. The delay to Mac Pro was about two months after the C2D-based Xeons were supposedly made available.

I refered to Cloverton because we don't know if Apple and Intel have something planned as they had there. If so, it could delay an intro.

[lonepilgrim]

Originally Posted by Tofino

isn't it EFI already in the intel macs?

I think he/she meant to question how this would affect OEMs whose machines run Windows.

[Charko]

It seems Apple's best-selling desktop was not mentioned - the iMac.

I believe there's going to be a new, redesigned iMac and it's going to be a big hit.

[zunx]

The movie is apple_tv-house_848x496.mov

That is NOT the true HD, which is 1080p at1920x1080 pixels instead of 848x496 pixels!!!

[Chucker]

Originally Posted by zunx

The movie is apple_tv-house_848x496.mov

That is NOT the true HD, which is 1080p at1920x1080 pixels instead of 848x496 pixels!!!

496p is indeed in the range of EDTV, not HDTV. However, true HDTV starts at 720p (1280x720), not at 1080p.

[palegolas]

Originally Posted by Ireland

They better release only a 3G version in Europe.

I'd consider a 3G phone the day there is an operator that can offer me data transfer at a set monthly fee. Not charge per MB. I know this is just about happening this year, but still: until it happens I have no interest in 3G, and I think an Edge iPhone with wifi is good enough.

[JeffDM]

Originally Posted by noirdesir

And about two months BEFORE the 3 GHz C2D-based Xeons will become available.

Yes, by completely abandoning the first rev of that part and using a revision that's reminiscent of a Netburst Pentium D in power consumption.

[Dean812]

God I love all things Apple! How do they do it?! Such amazing products! iPhone is gonna be great, I can hardly wait!

[freeny]

The "True video iPod" rumors are getting as old as the g5 laptop.
The iPhone is not a video iPod. Its a phone that plays video.

[solipsism]

Originally Posted by freeny

The "True video iPod" rumors are getting as old as the g5 laptop.
The iPhone is not a video iPod. Its a phone that plays video.

I must have missed the comment that claimed otherwise.

[onlooker]

Originally Posted by TheNipponese

Agreed. Making an EDGE device was really pretty bad on their part. Not only are they blocking out most of Europe and ALL of Japan, but the data comm is already obsolete by US smart-phone standards. It's a good thing most of the US public is too stupid to know the advantages of 3G over EDGE.

On the other hand, Cingular's marketing has done amazing job at obscuring the difference.

There isn't enough 3G coverage in the US to release a phone in iPod quantities because it wont work half the time in 75% of the US. Wifi spots are far more abundant than 3G signals. It's a simple matter of making a product that people can actually use.

[TonyD007]

What is this supposed to mean as far as the Macbook Pro goes?

"we expect a newly redesigned MacBook Pro in the Fall, new iterations of all Apple laptops featuring Intel’s new Santa Rosa platform in the Summer or early Fall, and perhaps an ultra-portable laptop at some point this year."

Is this supposed to mean that an updated Santa Rosa Macbook Pro will debute in the Summer? And 3 months later a redesigned Macbook Pro will debute in the Fall?

This article was very poorly written I must say.

[onlooker]

Originally Posted by TonyD007

What is this supposed to mean as far as the Macbook Pro goes?

"we expect a newly redesigned MacBook Pro in the Fall, new iterations of all Apple laptops featuring Intel’s new Santa Rosa platform in the Summer or early Fall, and perhaps an ultra-portable laptop at some point this year."

Is this supposed to mean that an updated Santa Rosa Macbook Pro will debute in the Summer? And 3 months later a redesigned Macbook Pro will debute in the Fall?

This article was very poorly written I must say.

What it means is that some guy that works for an investor group is speculating (guessing). He knows nothing for certain other than Apple is (obviously going to be) releasing new products, and their stock price will climb as it gets closer. Investors predictions are rarely right on, and neither are ours. We have better luck with our guessing in here than they do though.

[solipsism]

Originally Posted by onlooker

We have better luck with our guessing in here than they do though.

May I suggest the Apple Insider Analyst Group (AIAG)?

[Mr. H]

Originally Posted by TonyD007

What is this supposed to mean as far as the Macbook Pro goes?

"we expect a newly redesigned MacBook Pro in the Fall, new iterations of all Apple laptops featuring Intel’s new Santa Rosa platform in the Summer or early Fall, and perhaps an ultra-portable laptop at some point this year."

Is this supposed to mean that an updated Santa Rosa Macbook Pro will debute in the Summer? And 3 months later a redesigned Macbook Pro will debute in the Fall?

This article was very poorly written I must say.

I think what he meant is that he expects both MacBook Pro and non-pro will get Santa-Rosa at the same time, in summer or early autumn; and that then a redesigned (i.e. new/updated form-factor, L.E.D. backlighting etc.) MacBook Pro will appear after than in the autumn.

[melgross]

Originally Posted by Mr. H

I think what he meant is that he expects both MacBook Pro and non-pro will get Santa-Rosa at the same time, in summer or early autumn; and that then a redesigned (i.e. new/updated form-factor, L.E.D. backlighting etc.) MacBook Pro will appear after than in the autumn.

Right. It makes no sense for Apple to come out with new machines with (now) old chips and controllers. After all, what could they do, realistically, that would make these machines so compelling that would make it worthwhile to re-tool the manufacturing lines, and the costs that entails, for what, three, four, months production?

Santa Rosa, at least, would make the new machines desireable from a performance and power draw consideration.

And then, there is 45 nm coming up later this year as well, with both desktop and mobile versions.

Then first half of next year, Intel makes MAJOR revisions to its lines.

How many new versions can Apple come up with during this huge time of transitions? Maybe two?

[aircft.sys.spec.]

Originally Posted by Ireland

They better release only a 3G version in Europe.

What if 3G was already planned and Apple will activate this with a software revision. Apple has done this before. Maybe, they will charge $2.99 for it.