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BofA sees new iPod mid-year, iPhone by early 2007

post #1 of 12
Thread Starter 
Bank of America on Friday reduced its estimates slightly for Apple Computer's March quarter and next two fiscal years, pointing to unanswered questions about the company's potential to grow its share of the personal computer market and hints of weaker computer sales.

The firm reduced its projections for the recently concluded March quarter by 1 cent to 46 cents, or 2 cents above Street estimates. For fiscal year 2006, the firm lowered its estimates by 6 cents to $2.09, which compares to Street figures of $2.12. In fiscal year 2007, BofA estimates earnings of $2.40 a share, compared to the $2.60 estimated by the Street.

Still, the firm projects Apple will announce later this month that it sold 9.5 million iPods during its March quarter, which ran from January, while noting that "iPod growth remains healthy."

While the firm believes the outlook for iPods remains bright in 2006, it posed several questions on Apple's growth in the personal computer market.

"In the Dec 05 Q, Apple had gained 10 points of global share over the previous 4 quarters," analyst Keith Bachman wrote in a research note sent to clients before the weekend. "After the March 06 quarter, we believe that Apple will have gained no share or even lost share over the prior 4 quarters." He acknowledged that the company's Intel transitions was likely to blame.

"We believe that Apple is a superior product to the competition in CPUs/PCs, driven by the software," the analyst told clients. "However, we continue to believe that Apple CPUs represent a premium priced product in slow growing geographies (US, Japan and Western Europe)." As a result, he suggested investors assume only modest share gains in Apple's CPU business.

"To be fair," Bachman said, "our planned estimate cuts of CPU unit growth lessened by the offering of Boot Camp." The analyst believes that Boot Camp offers a "safety blanket" for those "switchers" that want to a) retain access to some applications that are either not available on Macs, and/or b) still be able to access to old records such as financial management documents that may be Windows only. Additionally, he believes that Boot Camp may make it easier for users who want to tunnel in to a corporate VPN with Windows so they can access work applications from home.

While BofA remains concerned about the impact of a slowing growth on the multiple, it "likes Apple's product cycles" and predicts the company will debut new notebooks in the June (current) quarter, a new video iPod by next year and a phone in either the Dec. quarter or early January.

Bank of America maintains a "Neutral" rating on Apple shares with a price target of $77.
post #2 of 12
someone at bank of america should get a clue....

unless i'm mistaken, apple doesn't and never has manufactured "CPU's"...
post #3 of 12
Bachman reads too many rumour boards methinks.

I am glad journalist don´t base their reporting on rumour forums and it only is the people managing our pensions that that base their deceptions on random information.
"I reject your reality and substitute it with my own" - President Bush
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"I reject your reality and substitute it with my own" - President Bush
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post #4 of 12
Reports like this only raise my hopes for an iPhone. They've been dashed so many times I don't know why I cling to the belief that Apple will actually bring an iPhone to market.
post #5 of 12
Price target of $77. If I can be frank for a moment that price target is plain dumb! When the 4th quarter comes this guy will say "well eh, it was just a guess, eh I'm like sorry and stuff, huh huh."
Citing unnamed sources with limited but direct knowledge of the rumoured device - Comedy Insider (Feb 2014)
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Citing unnamed sources with limited but direct knowledge of the rumoured device - Comedy Insider (Feb 2014)
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post #6 of 12
Quote:
Originally posted by Ireland
Price target of $77. If I can be frank for a moment that price target is plain dumb! When the 4th quarter comes this guy will say "well eh, it was just a guess, eh I'm like sorry and stuff, huh huh."

Aren't price targets educated guesses at best? The stock markets are highly volatile and fickle, I'm curious how good of a track record a stock analyst can possibly get. Also, apple tries to be as opaque as possible and that doesn't help anyone make predictions.
post #7 of 12
This evaluation is an estimate. The Apple market segment is unique. No one knows the ful impact of Boot Camp. I think there will be a demonstratiom of pent up demand that will suprise everyone. I think appl will go up beyond this analysts expectations. Too bad aapl doesn't have a better history. Just too much of a long shot for me.
go with the flow
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go with the flow
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post #8 of 12
When an analyst says they see a price target of $77 when they are currently at $69, that means they see 10% growth in valuation over a 12-month horizon. That is a simple, conservative number, and quite likely to not be missed.

They try to play games with discounting forward earnings, margins, and the like, but on the whole, they are saying that Apple will be worth 10% more next year than it is today.

While we are all here because we are Apple zealots, it's easy to look at the consensus earnings number and apply that to what you think Apple's forward premium is worth.

Their P/E ratio is 37.5, and the forward P/E is 33.4. The forward P/E compares to an industry norm of 33.2, so it is fairly valued on the basis of how much money people expect the industry to do. Earnings growth for FY 07 are expected at 23% compared to an industry norm of 21%. The short of all this is that based on current market pricing, people expect 10% more from Apple as they do their competitors.

For Apple to be worth dramatically more money than they are at now, they need to start selling at least 1.4M computer units per quarter, and push towards 2M in the December quarter. If that happens, they will be worth well over $100/share, but analysts expect them to miss the 1M unit mark this quarter, which looks really bad.

Personally, I think Apple should be at about $77-80 before they announce earnings, and drop back a few dollars afterwards... just like they do every earnings cycle. I think that even after last week's run-up, they are undervalued, and we will see another really strong year out of them.

Now will someone pay me a million dollars a year to be a stock analyst?
post #9 of 12
Bank of America = Bank of the stupid.

What's upsetting though is how investors actually listen to that crap instead of using common sense!
post #10 of 12
Bank of America is CRAZY to think Apple has lost market share this quarter. How much can market share go up in one quarter, anyway? But, I guarantee it is flat if not up a bit when the next numbers come out.
post #11 of 12
Quote:
Originally posted by Cubert
Bank of America is CRAZY to think Apple has lost market share this quarter. How much can market share go up in one quarter, anyway? But, I guarantee it is flat if not up a bit when the next numbers come out.

We'll see next week. I would have expected a small climb, but most analysts (even bullish ones) think unit numbers for Macs have dropped since last year. They have ears in the supply chain, and should have a pretty good idea on this stuff.

I can believe people waited for the intel iMac, and that there was pent-up demand that they capitalized on this quarter. At the same time, they were only able to take advantage of half of the quarter with MacBookPro delays. It also seems logical that consumers after an iBook thought twice about waiting, although I don't put much into that idea.

I would expect pros and mid-large businesses to account for 15-20% of mac sales, and the remainder small businesses and personal users. That kind of makeup doesn't make the intel transition look too bad, but if it is more heavily biased towards mid-large businesses, things are going to slow down for Apple for a while.
post #12 of 12
Quote:
Originally posted by aaarrrgggh
I would expect pros and mid-large businesses to account for 15-20% of mac sales, and the remainder small businesses and personal users. That kind of makeup doesn't make the intel transition look too bad, but if it is more heavily biased towards mid-large businesses, things are going to slow down for Apple for a while.

You left out education. That might be a factor, but my guess is that they generally wouldn't be upgrading their systems in the first quarter, and there may be concerns with software compatibility. Apple did secure a pretty big contract with Maine which they won't be delivering on for a whilet yet.
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