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Citigroup bullish on Apple: still time to buy

post #1 of 14
Thread Starter 
Shares of Apple Computer remain a favorite at Citigroup, where analysts on Thursday told clients it's not too late to invest in the iPod maker.

In a research note, analysts Richard Gardner and Yeechang Lee said they continue to view Apple shares as a compelling Buy, even on this morning's strength.

Shares of Apple are up over 11 percent today following the company's third quarter earnings report, in which it posted a net quarterly profit of $472 million. The company also said that Mac sales rose 12 percent to 1.33 million units.

"We believe that Apple is well positioned to gain at least one point of global consumer PC share annually thanks to superior ease of use, superior reliability and virus resistance, superior product design and, last but not least, the ability to run Windows on Intel- based Macs," Gardner told clients.

And despite a down quarter for iPods, the analyst said he sees plenty of space in the global market for Apple to build its install base of the players.

"We believe the global available market for portable digital music players is approximately three times the size of Apples current installed base of 45-50M units, suggesting potential for several more years of solid growth," Gardner wrote. "We also believe that investors underestimate Apples ability to bring innovation capable of driving regular upgrades to iPod (much as investors have underestimated the upgrade cycle for mobile phones in recent years).

Gardner is also one of several analyst who doubt Mircrosoft's rumored digital media player strategy will have a noticeable impact on Apple's iPod business, telling clients it's unlikely that Microsoft could produce a device with a user experience that rivals the iPod.

Additionally, he said, various other iPod competitors are relying on Windows Media Player 11 in order to deliver significant improvements to their players, which won't be available until Microsoft Vista ships sometime in 2007.

Over the next year, Gardner expects Apple to enter several new product and service categories, including portable media players, on-line movie downloads and 3G mobile phones that sport integrated music and photo capabilities.

"We do not believe that these new products are currently reflected in our estimates or consensus," he wrote. "We also expect a steady stream of compelling enhancements and/or price cuts to existing products in coming months beginning at the companys Worldwide Software Developers Conference on August 7."

In revising estimates for Apple's current (fourth) fiscal quarter, the analyst reduced his revenue estimate from $5.1B to $4.6B to reflect a reduction in assumed iPod shipments from 10.5M to 9.0M. "This change reflects our view that the redesigned iPod nano may not ship until mid-September," he said. For the same reasons, he also reduced his earnings-per-share (EPS) estimate from 59 cents to 54 cents.

Gardner also tweaked his 2007 and 2008 fiscal year models. In 2007, he expects Apple to generate revenue of $22.2B and EPS of $2.77 on sales of 49.5M iPods and 5.75M Macs. The following year, he sees the company generating $24.4B and EPS of $3.16 on sales of 57.5M iPods and 6.5M Macs.

Citigroup maintains a Buy rating on Apple shares with a price target of $80.
post #2 of 14
Yeah, it was better to buy it when it was $51.

Proud AAPL stock owner.

 

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Proud AAPL stock owner.

 

GOA

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post #3 of 14
Yea, and who bought when it was like $70
post #4 of 14
I would agree with this report, except for the 2007 and 2008 numbers, which I think will be higher.

What we've seen is Apple's Mac sales rise 30%, or more a quarter for almost 18 months before the transition. Then it almost stopped. Now that the transition is mostly over, and most programs are available on the Intel machines, the sales uptick has re-ignited.

I think that it will continue. I expect Mac sales to be more than 12% higher than last years quarter in this quarter. The increase of 19% over last quarter's sales gives me that confidence.

Once the Mac Pro and the XServes are on Intel, we will see increases in sales there as well, rather than the declines we have been seeing, which have been offsetting the increases otherwise seen.

Meroms in laptops will refresh sales there as well, even though those sales have been up by 60%.

Hopefully, the Mini will get some compelling upgrades that will make then more appealing.
post #5 of 14
Quote:
Originally posted by crees!
Yea, and who bought when it was like $70

I hate to admit to it, but I added to my holdings when it dropped to $73. But, as 90% of my stock was nought at $16.93, pre- split, I can live with that.
post #6 of 14
Apple is on the rise. Unless you're a day trader, buying at $73 was (and still is) a fine idea. I bought a bunch at 14.1 pre-split, and expect it to split again before I even entertain selling.
Cat: the other white meat
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Cat: the other white meat
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post #7 of 14
Quote:
Originally posted by SpamSandwich
Yeah, it was better to buy it when it was $51.

the pc world just doesn't get it.. and it goes on and on and on. It is Consumer electronics stupid and the only come up from underground every three months when Apple reports to see the future. Intel is loaded with stuff that won't sell cause there is nothing anyone wants that it would fit into. Apple runs TV spots for months and there are billboards all over the place - dah? Best buy is testing with or without Apple employees to sell computers so it isn't about if they are rolling out Mac this Fall- it is about their ability to get into the future of the very business they are already in with the only player (Apple) that is "getting it" with a CE solution. The rest of the industry is waking up here and there and whining whining whining with no substance. Maybe, just maybe, HP and MS and Dell and Lenovo will put together a package that can compete - or HP will do it on their own. Otherwise, Apple has a consumer electronics product and format cycle that won't quit until there is 100% saturation. Does anyone ever look at how many players sold in cassette and then CD to saturate a product cycle format? Nope, they just talk about ipod killers that don't exist.

you can't stop a product cycle you can't stop a product cycle .. in consumer electronics if the format is accepted by the consumer..

Apple only sold 8 million ipods last quarter because consumer electronics depends on competition to drive prices down. there is no competition so apple just sucks up incredible unheard of margin and lets the volume sit at lower levels (while commodity prices for memory crash and burn cause there is no competition buying anything from all the whiners). why would Apple want to compete with themselves and reduce price and margin?!!!

Price drives volume in Consumer electronics in any accepted "product format" that has at least 12% market share. at around 12% marketshare, most vendors can make money in an accepted product fomat in Consumer electronics.. No competition = no volume. Apple is storing up cash and will have plenty of room for price reductions to deal with competition if it EVER appears. Be certain of one thing: Ipod volume is as low as it can be (and still way up over last year) because there is no competition and because nothing will stop the product cycle.

In the mean time, they don't stand still. MS Zune isn't anything new with what is coming to compete from Apple. it is just another player without a consumer electronics format solution that is proven.
post #8 of 14
Quote:
Originally posted by maxmann
the pc world just doesn't get it.. and it goes on and on and on. It is Consumer electronics stupid and the only come up from underground every three months when Apple reports to see the future. Intel is loaded with stuff that won't sell cause there is nothing anyone wants that it would fit into. Apple runs TV spots for months and there are billboards all over the place - dah? Best buy is testing with or without Apple employees to sell computers so it isn't about if they are rolling out Mac this Fall- it is about their ability to get into the future of the very business they are already in with the only player (Apple) that is "getting it" with a CE solution. The rest of the industry is waking up here and there and whining whining whining with no substance. Maybe, just maybe, HP and MS and Dell and Lenovo will put together a package that can compete - or HP will do it on their own. Otherwise, Apple has a consumer electronics product and format cycle that won't quit until there is 100% saturation. Does anyone ever look at how many players sold in cassette and then CD to saturate a product cycle format? Nope, they just talk about ipod killers that don't exist.

you can't stop a product cycle you can't stop a product cycle .. in consumer electronics if the format is accepted by the consumer..

Apple only sold 8 million ipods last quarter because consumer electronics depends on competition to drive prices down. there is no competition so apple just sucks up incredible unheard of margin and lets the volume sit at lower levels (while commodity prices for memory crash and burn cause there is no competition buying anything from all the whiners). why would Apple want to compete with themselves and reduce price and margin?!!!

Price drives volume in Consumer electronics in any accepted "product format" that has at least 12% market share. at around 12% marketshare, most vendors can make money in an accepted product fomat in Consumer electronics.. No competition = no volume. Apple is storing up cash and will have plenty of room for price reductions to deal with competition if it EVER appears. Be certain of one thing: Ipod volume is as low as it can be (and still way up over last year) because there is no competition and because nothing will stop the product cycle.

In the mean time, they don't stand still. MS Zune isn't anything new with what is coming to compete from Apple. it is just another player without a consumer electronics format solution that is proven.

What does this have to do with getting in on the stock (again) while it's undervalued. This is a fine rant, but it's coming so far out of left field I have no idea why you even responded to my original post. \

Proud AAPL stock owner.

 

GOA

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Proud AAPL stock owner.

 

GOA

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post #9 of 14
Apple is a curious stock. It clearly has enormous potential. As Steve has pointed out many times. They own the key technologies (design, software, hardware) they need to proceed. They have the installed base, name, talent and cash to do whatever they want.

The downside is Apple's famed secrecy. As was pointed out in a Motley Fool column, we don't have a roadmap for Apple's future. We only get performance figures for the last quarter and guidance for the next. This makes life tough for investors since investing is so heavily biased towards future returns.

In effect, we have to trust that Apple has the skills and discipline to succeed.
Unofficial AppleScript Studio Lobbyist
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Unofficial AppleScript Studio Lobbyist
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post #10 of 14
I bought some more last Monday when it dipped to $50.61, going to sell when it hits ~$70 then wait for the next FUD to hit so it dips and the cycle continues

I have AAPL in my IRA long term, bought it at $8, I won't touch unless the stock goes crazy and hits $200
post #11 of 14
Quote:
Originally posted by BobABoui
... I won't touch unless the stock goes crazy and hits $200

Wow... wouldn't that be great...

Proud AAPL stock owner.

 

GOA

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Proud AAPL stock owner.

 

GOA

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post #12 of 14
Quote:
Originally posted by SpamSandwich
Wow... wouldn't that be great...

Then I could retire early!

Wait! I already did that.
post #13 of 14
Quote:
Originally posted by melgross
Then I could retire early!

Wait! I already did that.


Oh, now you're REALLY twisting that knife!... Ouch!

Proud AAPL stock owner.

 

GOA

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Proud AAPL stock owner.

 

GOA

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post #14 of 14
Quote:
Originally Posted by SpamSandwich View Post

Wow... wouldn't that be great...

it hit $200 and I'm back in at $135

my AAPL tip: don't watch it too closely, put a watch on the stock to alarm you when it hits a high or low number.
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