Morgan Stanley: consumers buying more iPods than cell phones

Posted:
in iPod + iTunes + AppleTV edited January 2014
After polling consumers on their purchase plans this holiday shopping season, Morgan Stanley remains bullish on Apple and believes the company's growth-driven portfolio franchise will continue to accelerate in 2006.



The firm raised its earnings-per-share estimates on the iPod maker for the 2006 and 2007 calendar years by 28 and 50 cents to $2.07 and $2.57, respectively. However, near-term iPod expectations could prove aggressive due to a lack of supply, the firm said.



"We continue to believe demand outstrips supply for iPods and that Apple is doing the best it can to supply both its own and traditional retail stores," analyst Rebecca Runkle wrote in a research note released to clients on Friday. The analyst recently conducted a survey of 2,500 US consumers and found that they plan to buy more iPod and related products than any other electronics category.



"To hone in on this point, more people plan to buy an iPod this holiday season than a cell phone," the analyst said. "Also interesting, more people plan to buy iTunes gift cards this season than non-iPod branded MP3 players."



Of all the consumers planning to purchase an iPod this holiday season, only 4- percent said they would purchase another brand of MP3 player if a store was out of their desired model.



"We think this speaks wonders on iPod brand loyalty and ultimately ties consumers into an expanding portfolio of Apple products," Runkle said. The analyst notes that: "Of the current MP3 player owners planning to buy an iPod this holiday, 40-percent currently own a non-iPod MP3 player -- a sign of additional iPod market share traction."



The survey also revealed that consumers are showing a demand shift away from simple iPods like the shuffle and towards higher function players like video iPod. "We believe this provides evidence that management of digital content in the living room is important to consumers and could drive incremental demand this coming year," Runkle said.



Still, only 8% of US households own iPods and 5% own Macs. Morgan Stanley sees this sub-10% penetration as key to additional retail expansion opportunities for Apple within the US.



"Apple management agrees its US retail footprint isn?t maxed out at the 135+ stores today," Runkle said. "While market demand, product execution and competitive dynamics will all impact the rate of growth and ultimate number of Apple retail stores, an analysis of similar retail chains suggests a number in the 300-400 store range is a fair target."



As further evidence that the iPod brand is drawing consumers to the Mac, the survey also revealed that iPod owners are three times as likely to seriously consider the purchase of a Mac as non-iPod owners.



Looking into Apple's product portfolio, Morgan Stanley said the company's supply chain is pointing to notebook shipments that could materially increase with the new Intel-based Macs that appear set to begin shipments in first quarter of 2006. The firm also sees the Mac mini and Front Row software moving into the living room, and an Apple-branded iPhone product sometime in the next 12 months.



"Apple hasn?t confirmed its phone strategy (or even acknowledged that one exists), but at our recent meeting management did suggest a) handset makers will eventually get an MP3 offering right and b) Apple?s strategy is to be an innovation leader," Runkle wrote.



Morgan Stanley maintains an Overweight (or Buy) rating on Apple shares with a price target of $90, up from $70. The firm is "sticking with" its 10.2 million iPod estimate for the quarter ending December 31st.
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Comments

  • Reply 1 of 35
    jeffdmjeffdm Posts: 12,951member
    To put it nicely, the title is a clever out-of-context quote of the article, I think that's pretty sad. Overall, there's no way that sales of iPods will beat those of cell phones, the article and survey apperently involves incredibly narrow and artificially constructed circumstances to claim otherwise.
  • Reply 2 of 35
    sekiosekio Posts: 150member
    I wish I had stock in Apple!
  • Reply 3 of 35
    nagrommenagromme Posts: 2,834member
    Yes, the headline doesn't seem right. It probably means that more people will be getting phones than iPods... but they're not PLANNING their phone purchases, whereas they have iPods on the brain. Or, they're getting phones for free and not "buying" them per se.



    Still, all good news for Apple.



    Nostalgia trip:

    http://forums.macrumors.com/showthre...=&threadid=500
  • Reply 4 of 35
    Quote:

    Originally posted by nagromme Nostalgia trip:

    http://forums.macrumors.com/showthre...=&threadid=500 [/B]



    Quote:

    This isn't revoltionary!

    I still can't believe this! All this hype for something so ridiculous! Who cares about an MP3 player? I want something new! I want them to think differently!

    Why oh why would they do this?! It's so wrong! It's so stupid!



    Oh, I love walks down memory lane.



    Anyway, this is good news for Apple, but not really unexpected.
  • Reply 5 of 35
    boogabooga Posts: 1,081member
    Quote:

    Of all the consumers planning to purchase an iPod this holiday season, only 4- percent said they would purchase another brand of MP3 player if a store was out of their desired model.



    I stand corrected. I thought Apple's supply problems had the potential to cut way more than 4% from their market share, but if that's a worst-case scenario Apple's doing pretty okay.
  • Reply 6 of 35
    The most amazing part of the article to me is the idea that investment folks might think that Apple could realistically open 3 times as many stores in the US as they have. Some obviously see the 5% market share as an advantage.
  • Reply 7 of 35
    eaieai Posts: 417member
    Quote:

    Originally posted by zedrac

    Oh, I love walks down memory lane.



    Anyway, this is good news for Apple, but not really unexpected.




    Quote:

    I'd call it the Cube 2.0 as it wont sell, and be killed off in a short time...and it's not really functional.



    Quote:

    All that hype for an MP3 player? Break-thru digital device? The Reality Distiortion Field? is starting to warp Steve's mind if he thinks for one second that this thing is gonna take off.



    Couldn't be more wrong really
  • Reply 8 of 35
    I too am not suprised but feel that Apple needs to pounce on a "Higher End" iPod once the x-mas season ends. We need additional functionality in this device to keep things flowing. A high end (next gen) iPod could fuel the demand until their iPhone is ready for market. To this add the "All New" hardware lineup just around the corner and expect very good growth for Apple all of next year and in 2007. Kick MS's ass!



    Based on what may be coming this January, I'm expecting a stock-split announcement by the end of that month, especially if pricing is more competitive. I'd also hope for another split (or very near) again by the end of the 06 year if enough new and incredible products get released.



    Get some stock cause WE ALL know Apple Computer is on the way up.
  • Reply 9 of 35
    Quote:

    Originally posted by nagromme





    Nostalgia trip:

    http://forums.macrumors.com/showthre...=&threadid=500




    Oh, wow. that was fun!
  • Reply 10 of 35
    I was at a birthday party for a family member and there were a whole mess of kids there. Being so close to christmas, there was the classic adult question for the kids. " what did you ask Santa for christmas?" every kid over the age of eight asked for an iPod.



    I was amazed because in previous years the answers were "yougi-oh" this and "nintendo" that. This year all the lil ones want iPods. I was even more taken back to find out that they were indeed going to get those iPods from santa. Lil kids age eight getting shuffles... 12 year olds getting Video iPods. and the parents picking up a nano for themselves while they are at the store. WOW!!



    just when the analysts think the market is saturated, the iPod permeates a new generation. now all apple has to do is make an iPod with huge buttons and giants screens for elderly people, and next cristmas will be another great year for apple.
  • Reply 11 of 35
    melgrossmelgross Posts: 33,030member
    Quote:

    Originally posted by MacGregor

    The most amazing part of the article to me is the idea that investment folks might think that Apple could realistically open 3 times as many stores in the US as they have. Some obviously see the 5% market share as an advantage.



    I agree with them. The Apple stores are doing extremely well. The soon to be ex flagship store in Soho NYC is so packed, that you can barely get around in it at times. They had to expand their four cash registers on the first floor to two more just for iPods and accessories in the iPod dept on the second floor, to several more on the other side of the second floor across from the iPod dept.



    If you arrive anytime around the 5 to 7 PM period during the work week, there are people constantly on all of the lines. The weekend is about as bad.



    They will have a new flagship store up shortly in the GM Plaza. I'm sure most have heard of it. It's the glass cube.



    But the Apple managers of the Soho store have told me that they didn't think that it would impact their sales at all.



    I'm not fond of the 5% marketshare. I'd be much happier with 10%, if it could happen. We are still losing developers, and websites are still not accommodating us as much as they should. It all depends upon marketshare.



    I'd love to see more hi end business apps, networking apps, etc, but it won't happen without the marketshare. I'm hoping that Apple is changing the way they deal with these big corporations so that this will happen.
  • Reply 12 of 35
    jeffdmjeffdm Posts: 12,951member
    Quote:

    Originally posted by melgross

    I'm not fond of the 5% marketshare. I'd be much happier with 10%, if it could happen.



    ...



    I'd love to see more hi end business apps, networking apps, etc, but it won't happen without the marketshare. I'm hoping that Apple is changing the way they deal with these big corporations so that this will happen.




    I agree with all of this. I'm hoping to be able to afford an inexpensive CAD program (er, relatively so), hopefully with machining capabilities next year.
  • Reply 13 of 35
    >>Of all the consumers planning to purchase an iPod this holiday season, only 4- percent said they would purchase another brand of MP3 player if a store was out of their desired model.



    "We think this speaks wonders on iPod brand loyalty and ultimately ties consumers into an expanding portfolio of Apple products," Runkle said.<<





    You just gotta love these "analysts". Any putz would say the same... ROTFLMAO!
  • Reply 14 of 35
    Quote:

    Originally posted by JeffDM

    I agree with all of this. I'm hoping to be able to afford an inexpensive CAD program (er, relatively so), hopefully with machining capabilities next year.



    Interesting... are you creating a CNC milling machine controlled by Mac? I hear there's a lot of new activity in this area, what with custom fabrication set-ups accelarating.
  • Reply 15 of 35
    Quote:

    Originally posted by Sekio

    I wish I had stock in Apple!



    Not wishing, but wishing I had more.
  • Reply 16 of 35
    melgrossmelgross Posts: 33,030member
    Quote:

    Originally posted by SpamSandwich

    >>Of all the consumers planning to purchase an iPod this holiday season, only 4- percent said they would purchase another brand of MP3 player if a store was out of their desired model.



    "We think this speaks wonders on iPod brand loyalty and ultimately ties consumers into an expanding portfolio of Apple products," Runkle said.<<





    You just gotta love these "analysts". Any putz would say the same... ROTFLMAO!




    Except that "any putz" wouldn't have any idea of what they are talking about. These people actually do the survery.
  • Reply 17 of 35
    melgrossmelgross Posts: 33,030member
    Quote:

    Originally posted by SpamSandwich

    Interesting... are you creating a CNC milling machine controlled by Mac? I hear there's a lot of new activity in this area, what with custom fabrication set-ups accelarating.



    While I don't know if he does, I would love to have my machines controlled by one of my Macs instead of the PC.



    Most Mac software in this area is just dreadful, not easily obtainable, and almost always very expensive.
  • Reply 18 of 35
    Quote:

    Originally posted by melgross

    While I don't know if he does, I would love to have my machines controlled by one of my Macs instead of the PC.



    Most Mac software in this area is just dreadful, not easily obtainable, and almost always very expensive.






    I agree. Frankly, as far as CAD goes, I used to have a nice little app called "DrawingBoard" for OS9 (which no longer works in OSX). Then, OSX rolls around, now it's called "Graphite" and it's loaded with additional junk I don't need and it certainly does not seem as stable as DrawingBoard used to be.



    CAD could be radically slimmed down to give snappy, OS9-like performance by Ashlar-Vellum or any competitor out there. Most CAD sucks.
  • Reply 19 of 35
    Quote:

    Originally posted by nagromme

    Nostalgia trip:

    http://forums.macrumors.com/showthre...=&threadid=500 [/B]



    My, oooooh my. That entire thread should be required reading before participating in any rumor site.



    I'd forgotten how doom-and-gloom so many Mac users were about the iPod when it came out. I recall people saying that Apple was going to abandon making Macs too. I should dig up the Slashdot thread. I remember that being filled with ridicule and naysaying about the iPod as well.
  • Reply 20 of 35
    gongon Posts: 2,437member
    Quote:

    Originally posted by sillycybin

    12 year olds getting Video iPods



    Why do 12-year olds want video iPods in the first place, and are the parents really buying them?
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