Ingrid Ebeling, an analyst at the firm, made the comments in a research note distributed to clients on Wednesday, in which she offered a preview of the Cupertino-based company's fiscal second quarter results due April 25th.
"During Sony’s 15-year reign with the Walkman, the company sold over 350 million units, and we believe that Apple’s addressable market over time will exceed this number given the upgrade and replaceable nature of iPods as well as the overriding trend of consumers’ increasing use of digital media," she wrote. "The net takeaway is that this is a product category that is far from saturated, and we believe well over 500 million units will be sold before the product category hits maturation."
Ebeling said checks indicate that iPod sales fell slightly between the month's of January and February, but attributed the cool-off to unusually strong sales in January as consumers were making use of their iTunes gift cards acquired during the December holidays.
For the three-month fiscal second quarter ended March, the analyst estimates Apple to have sold 10.8 million iPods, or about half as many as it sold during the December quarter. Still, those sales should generate about $1.76 billion in revenue, representing year-over-year growth in units of 33 percent and revenue growth of 18.2 percent.
"First calendar quarter sales in consumer electronics are always the weakest of the year, and we wouldn’t view any perceived weakness as concern for the category and iPods," she explained.
Ebeling was similarly optimistic on EMI's recent decision to make its digital music catalog available to iTunes shoppers without copy protection measures, explaining that the move could act as a buy-in catalyst for consumers who may have previous been deterred by the iPod's closed ecosystem.
Touching on the Mac, the JMP analyst said she is expecting the upcoming release of Leopard to help further grow market share, as consumers may be holding off on a new Mac until they come pre-installed with new operating system. (An AppleInsider poll of over 1500 readers conducted on Tuesday evening revealed that more than 30 percent of respondents are currently withholding their Mac purchases until Apple releases machines with Leopard already installed. An additional 50 percent said they are delaying new Mac purchases as they await new MacBooks (25 percent), new iMacs (17.3 percent), and the MacBook ultra-portable (11 percent).)
"Despite the initial good results of Vista with consumers, Apple’s 'I’m a PC, I’m a Mac' campaign, the success of its 165-store retail strategy, the increasing use of a computer for managing digital media (one of Mac’s many strengths), among other things, are all contributing to expanding market share," Ebeling wrote. "A contact in the education market has confirmed that his district, largely a Windows-based system, is widening its use of Macs."
For Apple's March quarter, the analyst is forecasting Macs unit sales of 1.3 million and revenue of $1,898 million, representing year-over-year growth in units and revenue of 21 percent. "We believe we could be conservative with our average selling price, which we have forecasted to be just over $1,400 compared to $1,500 in the December quarter due to the shift towards higher priced laptops," she added.
In her note to clients, Ebeling also remained bullish on he prospect of Apple TV emerging as "a sleeper hit," saying checks indicate that the $300 wireless media hub is off to a strong start. "So far, reviews have been generally positive, and we believe our forecast of 1.1M units through [fiscal 2008] could be conservative, representing only 2 percent of the broadband Internet households in the US," she wrote. "While we believe the hype around the iPhone is real, we note that the Apple TV does not have nearly as many competitive products on the market as the iPhone will have, and consumers appear to be ready for technologies that bridge the gap between the PC and the HDTV and provide video on demand services."
The analyst reiterated her "Market Outperform" rating on shares of Apple with a price target of $100. Overall, she expects the consumer electronics firm to report second quarter earnings of 59 cents per share on sales of $5 billion, helped by 29.7 percent gross margins.