Better iPod mix and early Intel Macs
"We are excited about the prospects for further revenue contribution from iPods due to what we perceive as a positive mix shift to video iPods, which have a higher average selling price (ASP) than either the nano or Shuffle," said analyst Ben Reitzes. "Second, we believe Intel Macs could come as early as Macworld and believe that the initial release could be a broad portfolio of products."
The analyst believes the "iPod Multiplier Effect" is taking shape with strong sales in Macs, retail and peripherals. Additionally, Reitzes said he would not be surprised if Mac sales were buoyed in the future by enhanced digital media capabilities that could catapult Apple to the forefront of the digital home.
Looking ahead to Macworld
UBS believes it is likely Apple will announce new products and content at its January 10, 2006 Macworld with the likely introduction of the first of the Intel- based Macs, which would be much earlier than the companys June guidance.
Reitzes said the Macworld show could turn out to be a "circus" that includes a few new Macs and other introductions such as digital entertainment/media devices, content and services.
"We note that Intel will be introducing its dual-core Yonah processor in January (shipping now to vendors in pre-launch)," said Reitzes. "We believe it is possible for Apple to launch 2-3 new Intel-based Macs by early next year (including even iMacs and PowerBooks)."
The analyst also made reference to recent news reports of an improved Mac mini that may be on the horizon, perhaps as a digital media device.
"We continue to believe that Apple may expand its "digital hub offerings to attempt to become even a bigger part of the digital home with possible new product introductions as early as at Macworld in January that may include "DVR-like" functionalities."
Media hubs, Viiv, Apple-branded phones
Reitzes said Apple could eventually discuss more innovations around media hubs (and related services) that act as storage units for music, movies, photos and/or other types of home entertainment -- pointing out that Intel's soon-to-be introduced "Viiv" could allow the company to explore additional consumer entertainment opportunities within the personal computer.
"We also believe that the company may choose to enter new consumer markets such as Apple branded cell-phones over the next 2 years where the company would be able to leverage its market leading innovations and creative designs that have made the iPod such a tremendous hit with customers," the analyst said.
Given the above, UBS has raised its estimates on Apple through the 2007 fiscal year (FY). For FY06, the firm raised its earnings-per-share (EPS) estimate to $2.10 from $1.85 based on revenue growth of 42-percent year-over-year to $19.8B. In FY07, UBS expects EPS to come in at $2.58 based on revenue growth of 18-percent to $23.3B.
11.4 million iPods this quarter?
For the current quarter, the firm expects Apple to report EPS of 58 cents based on revenue growth of 50-percent year-over-year to $5.2B including iPod unit growth of 149-percent year-over-year to 11.4 million units (including sales of over 3 million video iPods.)
UBS continues to rate Apple a "Buy", raising its price target from $74 to $86 a share.