ML upgrades Apple, says iPhone could be near
Merrill Lynch today updated its rating on shares of Apple Computer from Neutral to Buy with a price target of $72, saying the risk-to-reward ratio of the company's stock has recently improved.
In supporting the upgrade, analyst Richard Farmer offered clients eight examples of why he believes shares of the Mac maker are once again attractive.
In addition to increased confidence in the potential for Mac market share gains and waning iPod deceleration, Farmer believes the overhang from the company's stock options investigation is starting to diminish.
"Our sense has been that potential Apple shareholders were understandably hesitant to buy stock with the stock option timing investigation seemingly open ended," he told clients. "Although there is not yet definitive conclusion to the investigation and we offer no legal opinion on the substance of irregularities, we think the statement [...] by Apple management (that financial restatement is not anticipated) suggests risk is lower."
Farmer also said that while the potential for an iPod phone is not news, its financial impact is not part of consensus estimates. "The fact that management publicly alluded to it (albeit indirectly) on the conference call reinforces the possibility that its introduction could be near enough to influence consensus estimates within the next 12 months," he said.
With the mobile phone market set to possibly approach 1 billion units in 2008, the analyst believes every 1 percent share potentially captured by Apple could produce as much as $3B in incremental revenue, assuming Apple sells the phones for around $300.
"Cracking the phone business won?t be simple given the complexity of the business model and ecosystem but we see iTunes as a key asset that can create differentiation for consumers as phones and other mobile media devices (like iPods) converge over time," Farmer told clients.
Among the analyst's other top reasons to own shares of Apple are the imminent arrival of the company's strong back-to-school and holiday quarters, a nearly completed Intel transition, upcoming margin expansion and a shift in focus by the Street towards Apple's fiscal year 2008 (supporting valuation).
In supporting the upgrade, analyst Richard Farmer offered clients eight examples of why he believes shares of the Mac maker are once again attractive.
In addition to increased confidence in the potential for Mac market share gains and waning iPod deceleration, Farmer believes the overhang from the company's stock options investigation is starting to diminish.
"Our sense has been that potential Apple shareholders were understandably hesitant to buy stock with the stock option timing investigation seemingly open ended," he told clients. "Although there is not yet definitive conclusion to the investigation and we offer no legal opinion on the substance of irregularities, we think the statement [...] by Apple management (that financial restatement is not anticipated) suggests risk is lower."
Farmer also said that while the potential for an iPod phone is not news, its financial impact is not part of consensus estimates. "The fact that management publicly alluded to it (albeit indirectly) on the conference call reinforces the possibility that its introduction could be near enough to influence consensus estimates within the next 12 months," he said.
With the mobile phone market set to possibly approach 1 billion units in 2008, the analyst believes every 1 percent share potentially captured by Apple could produce as much as $3B in incremental revenue, assuming Apple sells the phones for around $300.
"Cracking the phone business won?t be simple given the complexity of the business model and ecosystem but we see iTunes as a key asset that can create differentiation for consumers as phones and other mobile media devices (like iPods) converge over time," Farmer told clients.
Among the analyst's other top reasons to own shares of Apple are the imminent arrival of the company's strong back-to-school and holiday quarters, a nearly completed Intel transition, upcoming margin expansion and a shift in focus by the Street towards Apple's fiscal year 2008 (supporting valuation).
Comments
/apologies in advance for the foul language, but when I checked the shares that's what I said.
In my case, I was pretty happy about it. 8)
But this quarter looked good, so the stock is set to rise.
Yesterday, the Feds discussion about inflation helped to get a rise in the market, so that helped, and will continue to help.
OTOH very few people are happy with their cell phone company or service, so I suppose there is room if Apple could improve on their shortcomings.
However, I think Apple recognizes these problems and will only come out with something if they can overcome them. On the other hand, if we're looking at some kind of "smart phone" (can you say OS X CE?
Apple has its own MVNO data network where they charge a flat yearly rate for its use. The phone could have 10GB or 12GB Microdrive storage. WiFi connection, Bluetooth, USB, stereo/video out port.
You can talk on the phone, send e-mail, IM, surf the web on a mobile version of Safari. You could also have the option of WiFi for free SMS texting, IM, VOIP and Video conferencing through iChat.
You can take pictures and download them to iPhoto or shoot small videos for edit in iMovie, e-mail as a Quicktime files, or burn in iDVD.
A phone and service like this would easily beat current cell features and plans. But in reality is this even economically feasible? Would this be of any real use?
Originally posted by TenoBell
It is cool to imagine an Apple smartphone with a lite version of OS X. That can sync to Apple Mail, iChat, Address Book, iCal, iPhoto and iTunes.
Apple has its own MVNO data network where they charge a flat yearly rate for its use. The phone could have 10GB or 12GB Microdrive storage. WiFi connection, Bluetooth, USB, stereo/video out port.
You can talk on the phone, send e-mail, IM, surf the web on a mobile version of Safari. You could also have the option of WiFi for free SMS texting, IM, VOIP and Video conferencing through iChat.
You can take pictures and download them to iPhoto or shoot small videos for edit in iMovie, e-mail as a Quicktime files, or burn in iDVD.
A phone and service like this would easily beat current cell features and plans. But in reality is this even economically feasible? Would this be of any real use?
One yearly flat rate, it's called .Mac, Oh and you forgot download and listen to music from the iTunes Music Store
Originally posted by TenoBell
I'm worried about how obsessed the analysts are with the Apple MP3 player idea. I think it more likely Apple will not release an MP3 player. Apple would have to come up with a revolutionary and ingenious system. The MP3 player market is beyond mature into saturated with companies introducing new ideas to it every day.
Dude, it's like a flashback to 2000.
Originally posted by TenoBell
OTOH very few people are happy with their cell phone company or service, so I suppose there is room if Apple could improve on their shortcomings.
Until I was disabled due to a work injury, I was the Regional Sales Manager (North and South Carolina) for a National Cellular Provider. I can tell you first hand the pent up anger of alot of customers over the business model that most US cellular providers use. Most people really are unhappy, to the point that they are waiting out their contract to change company, just to beccome unhappy with the company they change to.
The only way I can see Apple winning is to become an MVNO (Mobile Virtual Network Operator). Apple is all about the user experience. By being the equipment manufacturer and the service provider they have a closed ecosystem that they totally control.
If the iPod phone is anywhere near the quality of the iPod, they have won half the battle. The other is contracts. If Apple goes the MVNO route I hope they don't use the contract model. Most companies induce the customer into a contract for reduced equipment costs. The iPod phone could be sold for retail and no contract for service.
If they go MVNO I hope they choose Sprint instead of Cingular. I know people have deep set feelings about CDMA vs GSM (worldnesss). But the networks are about the same size and EVDO is Faster than Edge. I didn't mention Verizon as a candidate because there is a 10 Year roaming/network sharing agreement between Verison, Sprint and Alltel plus Sprint has a much better MVNO program that is VERY mature.
To summerize what I would like to see:
1) Apple to be an MVNO operator, preferably Sprint.
2) The equipment to be sold for retail prices. $299 or $399,.
3) No contracts required for service. Hopefully they would not charge the $35 activation fee, but I doubt it.
4) Simple plan structure. Only offer single and family plans that feature a national map coverage foot print. Simple ala carte feature pricing for Data Features (Text Messaging, Instant Messaging, Internet Access, ect...)
5) Push to have the phones and service sold at the two largest US cellular outlets. Radioshack (and Radioshack's subsiderary "Kiosk Operations Inc." The Mall Kiosk People) and BestBuy. Of course the Apple stores as well.
Sorry for the long post, just my nickel's worth.
edit: spelling
Earlier this week they were bashing AAPL citing iPod delays and stock option probes and claiming sales wont be up to par.
AAPL releases record numbers...shoots up 12%...and all of a sudden these idiots call apple a buy. "The stock options problem is fading", "iphone is coming", and "we think mac sales are going to be great".
If they knew what they were talking about maybe they could advise investors BEFORE the stock makes its move. Not afterwards. They are basically just explaining what just happened to the stock, not what is going to happen.
I honestly have trouble believing how ridiculous this is...But then I refer to my signature...
down here...
Originally posted by Kickaha
Dude, it's like a flashback to 2000.
What are you, a spider hiding in the corner waiting to pounce?
Where have you been?
Originally posted by kresh
Until I was disabled due to a work injury, I was the Regional Sales Manager (North and South Carolina) for a National Cellular Provider. I can tell you first hand the pent up anger of alot of customers over the business model that most US cellular providers use. Most people really are unhappy, to the point that they are waiting out their contract to change company, just to beccome unhappy with the company they change to.
The only way I can see Apple winning is to become an MVNO (Mobile Vitual Network Operator). Apple is all about the user experience. Buy being the equipment manufacturer and the service provider they have a closed ecosystem that they totally control.
If the iPod phone is anywhere near the quality of the iPod, they have won half the battle. The other is contracts. If Apple goes the MVNO route I hope they don't use the contract model. Most companies induce the customer into a contract for reduced equipment costs. The iPod phone could be sold for retail and no contract for service.
If they go MVNO I hope they choose Sprint instead of Cingular. I know people have deep set feelings about CDMA vs GSM (worldnesss). But the networks are about the same size and EVDO is Faster than Edge. I didn't mention Verizon as a candidate because there is a 10 Year roaming/network sharing agreement between Verison, Sprint and Alltel plus Sprint has a much better MVNO program that is VERY mature.
To summerize what I would like to see:
1) Apple to be an MVNO operator, preferably Sprint.
2) The equipment to be sold for retail prices. $299 or $399,.
3) No contracts required for service. Hopefully they would not charge the $35 activation fee, but I doubt it.
4) Simple plan structure. Only offer single and family plans that feature a national map coverage foot print. Simple ala carte feature pricing for Data Features (Text Messaging, Instant Messaging, Internet Access, ect...)
5) Push to have the phones and service sold at the two largest US cellular outlets. Radioshack (and Radioshack's subsiderary "Kiosk Operations Inc." The Mall Kiosk People) and BestBuy. Of course the Apple stores as well.
Sorry for the long post, just my nickel's worth.
edit: spelling
I mostly agree with this. I just posted the argument elsewhere here, though not in such detail.
Originally posted by wealjays
Anyone else notice how fast these analysts change their tune?
Earlier this week they were bashing AAPL citing iPod delays and stock option probes and claiming sales wont be up to par.
AAPL releases record numbers...shoots up 12%...and all of a sudden these idiots call apple a buy. "The stock options problem is fading", "iphone is coming", and "we think mac sales are going to be great".
If they knew what they were talking about maybe they could advise investors BEFORE the stock makes its move. Not afterwards. They are basically just explaining what just happened to the stock, not what is going to happen.
I honestly have trouble believing how ridiculous this is...But then I refer to my signature...
down here...
They've ALL been calling Apple a buy for months. This isn't new.
Originally posted by melgross
What are you, a spider hiding in the corner waiting to pounce?
Where have you been?
Don't ask.
Originally posted by TenoBell
I'm worried about how obsessed the analysts are with the Apple phone idea. I think it more likely Apple will not release a phone. Apple would have to come up with a revolutionary and ingenious system. The mobile phone market is beyond mature into saturated with companies introducing new ideas to it every day.
OTOH very few people are happy with their cell phone company or service, so I suppose there is room if Apple could improve on their shortcomings.
There is a rising multi billion dollar market for ringtones. If Apple releases a phone, that has the ability to choose a song, and what part of the song, is to become the ringtone, this would be an overwhelming atvantage in the market. It would allow them to capture a good percentage of the phone market as well as an even better part of the ringtone market.
I imagine that an iPhone (or iTalk, whatever) will incorporate texting functionality... the kids just love it.
ARTICLE---
Ohmigod, teens are so over e-mail!
E-mail use is dropping fast among teens - a bonanza for wireless operators, but a troublesome trend for Web portals and online marketers.
By Michal Lev-Ram, Business 2.0 Magazine writer-reporter
SAN FRANCISCO (Business 2.0 Magazine) -- E-mail is so, like, 2005. Just ask the kids: A recent ComScore Media Metrix report shows teen usage of Web-based e-mail dropped 8 percent last year.
In search of a faster, more fluid way to communicate with friends, today's so-called "instant generation" is turning to text messaging and IM instead.
The growing trend spells good news for mobile operators, who last year raked in $70 billion in text messaging revenues worldwide, according to technology research firm Gartner.
But it could spell big trouble for Web portals, which depend on e-mail for much of their traffic. According to Hitwise, a research company that tracks Web traffic, Yahoo (Charts) and Microsoft (Charts) got more traffic to their e-mail Web sites than their main portal pages.
Big bucks from short messages
With charges of up to 15 cents per outgoing and incoming message, it's no surprise wireless network operators are making lots of money from the billions of emoticon-packed text messages young users churn out on their cell phones each year.
While text messaging is far more popular overseas - users in some European countries send more than 100 messages a month - usage in the United States is picking up fast. In the first quarter of 2006, Verizon Wireless's 54.8 million customers sent and received about two messages a day on average, generating nearly 10 billion text messages over three months.
"It's the folded-up note of this time period," Joel Kades, Virgin Mobile USA's VP of strategic planning and consumer insight, says of the growing popularity of text messaging.
Among parents, text-message charges are controversial, if only for the end-of-the-month shock when they receive their bill. But to their credit, mobile operators have gotten smarter about the way they charge young customers for text messages - many are now pushing affordable monthly plans, instead of the more traditional (and pricey) pay-per-message fees.
The always youth-centric Virgin halved its per-message fee - from 10 to 5 cents - to attract avid young texters with fixed budgets.
Earlier this summer, Virgin also kicked off a "penny texting" campaign, promoting new text-message packages that give users a thousand messages for $9.99 a month. A crowd of young texters showed up for Virgin's penny-texting launch party in New York's Times Square last month, where B-list celebrity K-Fed (also known as Mr. Britney Spears) showed up to help spread the affordable text messaging word.
Texts are for kids
Haven't heard of K-Fed? You're probably not the target audience for Virgin's message.
But it's a demographic Maya Bruhis, a 16-year-old who can text with her eyes closed, fits into well. The Palo Alto, Calif. teen sends 10 to 15 text messages a day on her Motorola Razr phone.
"If I want to send quick messages to my friends, I text," says Bruhis in a rare phone call. "E-mails are more for work and school."
Bruhis isn't alone. According to a recent Pew Internet & American Life Project report on teens and technology, nearly two-thirds of teen owners of cell phones use text messaging.
Getting the instant message, too
And when kids aren't on cell phones, they're probably using instant messaging instead of e-mail. The same Pew report found that 46 percent of teens who are online chose IM over e-mail as their preferred method of written communication with friends.
Text messaging and instant messaging sound pretty similar - and in fact, they're converging on cell phones, creating another way for wireless carriers to profit. Many also offer young customers mobile versions of IM services like AIM, MSN and Yahoo Messenger. Often, these are being marketed in the form of monthly plans as well.
"Everybody's got an IM account," says Beverly Wilks, marketing director for Oz Communications, a Montreal-based company that sells mobile IM software and services to network operators such as Sprint Nextel, T-Mobile USA, and Virgin. "What we're doing is extending that presence to the mobile phone, so young users are able to share special moments on the go."
Radicati Group, an analysis company, expects IM use worldwide to reach 46.5 billion messages a day by 2009. There are no estimates on how many of those will be delivered to cell phones instead of computers, but analysts expect mobile IM usage to grow rapidly.
With numbers like those, one can't help but wonder: Are teens, like, really going to stop using e-mail altogether?
Probably not, says Mary Madden, a senior research specialist with Pew Internet who worked on last year's report.
"I really don't think e-mail's going to disappear anytime soon," says Madden. "But for social interactions, it's definitely no longer the bread and butter for teens."
Even if e-mail becomes less popular, that's a troublesome trend for operators of Web portals like Yahoo, Google (Charts), AOL, and Microsoft. All of them offer free, Web-based e-mail to draw users back to their Web sites on a regular basis. If teens log on to check e-mail once daily, rather than several times throughout the day, that will be a major hit to their traffic.
Marketers could switch from Web ads to text-message ads. But carriers and government regulators restrict what kind of ads are allowed. And texts are limited in length, making it hard to craft campaigns. That adds up to a tough message for advertisers hoping to reach teens.
The mobile phone market is beyond mature into saturated with companies introducing new ideas to it every day.
And EVERY SINGLE CELL PHONE I HAVE SEEN IN MY LIFE SUCKS. Every last one of them. 20 buttons, garish icons/interface, multiple clicks to do every-day operations, shitty reception, shitty quality of voice, shitty web features, shitty buttons, shitty quality. Shit.
I would say the market for GOOD phones is anything but saturated. Perhaps it doesn't exist yet. Phones could be likened to computers. Or MP3 players. In that the market is there, but it's waiting for Apple to come in and release something that Just Works?.
I think they'll do it. Soon. Maybe next year. Probably not around the corner though. I wonder where all these analysts are getting these ideas. Sources? Speculation? Whatcha'll think.
Originally posted by SpamSandwich
[B]Text, Text, Text...
I imagine that an iPhone (or iTalk, whatever) will incorporate texting functionality... the kids just love it.
My daughter, and her friends, tell me that they hate texting. I was surprised at that, as it's supposed to be so common among teens. But perhaps they have to look at the age groups more carefully. My daughter will be 15 Sept 3rd. Here friends are about the same age. One of my friends daughters is 17, and she does like texting, and says that some of her friends use it.
They all like IM, and use it all the time.