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Apple seen edging Street estimates for March quarter

post #1 of 9
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Apple's second quarter Mac and iPod sales are likely to come in just above Wall Street's expectations, helping to drive slight upside to overall consensus revenue and per-share earnings estimates, according one investment research firm.

Following Apple's announcement earlier this month that it had sold its 100 millionth iPod, PiperJaffray analyst Gene Munster performed product sell-through checks with 20 Apple resellers and found that 85 percent were expecting a slight quarter-to-quarter decline in Mac sales of about 5 to 10 percent.

Mac sales and share fluctuations

"The Street is expecting Mac units to fall 10 percent quarter-to-quarter, so we may see slight upside to Street expectations of 1.45m Macs," the analyst told clients in a research note Monday. "The other 15 percent of Mac resellers expect Mac units to be flat quarter-to-quarter."

Meanwhile, Munster said two rounds of checks with 50 different retail stores selling Vista and Vista-enabled PCs has led him to believe that Mac market share will decline from 2.5 percent in December to 2.3 percent in March when market research firm IDC releases its preliminary rankings.

"Recently released Gartner data for PC shipments in calendar Q1 confirm this thesis ([Apple's] US share declined from 5.1 percent in Dec to 5 percent in March)," he explained. "However, this will represent a year-over-year market share gain (up from 2.1 percent in March 06)."

Nonetheless, Munster said Mac market share should rebound rapidly during Apple's current third fiscal quarter, which runs April - June. He cited the Cupertino-based firm's dominance in the portable market as a catalyst for Mac market share gains, given that the industry continues to shift away from desktop systems and towards notebooks. "iPod and iTunes users are increasingly switching to Macs, because they offer superior media management," the analyst added.

Why are Mac share gains taking so long?

At the same time, however, Munster noted that more material Mac share gains may take a bit longer to garner than some investors may have been expecting. He explained that one obstacle to adoption is the PC upgrade cycle estimated at about 4 years, meaning Apple is likely to benefit from "mid to long term market share gains," rather than immediate ones, as computer buyers work through the upgrade cycle.

One factor not believed to be affecting Mac sales at this time is Leopard, according to the PiperJaffray analyst. "While industry experts and Apple enthusiasts are eagerly awaiting Apple's latest OS, we find that the delayed release is not impacting Mac sales amongst consumers," he wrote. "We are observing little to no delay of Mac purchases due to Leopard. That said, we believe Leopard will be a catalyst for Mac sales in Apple's December 07 quarter, the key holiday shopping quarter in which iPod sales usually take center stage."

March quarter expectations

Overall, Munster is expecting Apple to report slight upside to second quarter consensus estimates of 63 cents in per-share earnings and $5.2 billion in sales. Favorable component pricing should help matters, along with sales of approximately 11 million iPods (vs. Street consensus of 10.7 million) and more than 1.45 million Macs.

2 million Apple TV's in 2007?

Apple TV, which did not ship until March 20th -- 10 days before quarter's end -- is not expected to have a material impact on the quarter. However, Munster said his checks indicate that Apple did manage to ship each and every one of its pre-orders for the $299 streaming media device .

"Pre-orders were taken starting at the time the product was announced on Jan. 9, 2007, at which time Apple TV was at [the] top of the Apple Store Online's 'Top Sellers' list," the analyst told clients. "Apple TV fell off the list in late Feb, but crept back up in April after the product shipped and Apple launched an Apple TV ad campaign."

In pushing Apple TV to market, Apple is leveraging its iTunes user base of approximately 110 million users. Munster believes that addressable market will expand as the iTunes user base grows, and as more video content is added to the store. He's currently modeling for sales of 2 million Apple TV units through calendar year 2007, where every additional 500,000 units will add 2 cents to the company's earnings.
post #2 of 9
Sounds like it's time for an iPod refresh.

Nano storage bumps in May and iPod widescreen in September?
post #3 of 9
Edging is much too conservative. How about blowing the street estimates out of the water.
post #4 of 9
Quote:
Originally Posted by g5man View Post

Edging is much too conservative. How about blowing the street estimates out of the water.

Of course they're going to blow past street estimates. The question is how close or far past the whisper numbers will Apple go. Those are the numbers the street has already priced the stock at. So, if they blow past the estimates, but come in short of the whispers, there'll be a sell off.
post #5 of 9
2M in 10 months? Would that be considered a failure considering that Apple has yet to start selling HD content on the iTunes Store? I don't think so.
Dick Applebaum on whether the iPad is a personal computer: "BTW, I am posting this from my iPad pc while sitting on the throne... personal enough for you?"
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Dick Applebaum on whether the iPad is a personal computer: "BTW, I am posting this from my iPad pc while sitting on the throne... personal enough for you?"
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post #6 of 9
We all love bashing the analysts when they say bad things about Apple. Why should we believe (or even care about) them when they say nice things?
post #7 of 9
Quote:
Originally Posted by lkrupp View Post

We all love bashing the analysts when they say bad things about Apple. Why should we believe (or even care about) them when they say nice things?

Because it's more fun to beat up bearers of bad news!
post #8 of 9
Quote:
Originally Posted by Louzer View Post

Of course they're going to blow past street estimates. The question is how close or far past the whisper numbers will Apple go. Those are the numbers the street has already priced the stock at. So, if they blow past the estimates, but come in short of the whispers, there'll be a sell off.


What is the whisper number you have heard about? Apple estimated .59 a share while the street expects .64 a share. The whisper number may be .75 but I think we might see .85 to 1.
post #9 of 9
Quote:
Originally Posted by solipsism View Post

2M in 10 months? Would that be considered a failure considering that Apple has yet to start selling HD content on the iTunes Store? I don't think so.

How about introducing HD content and European movie store at an event soon?
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