$900 MacBook would grow Apple's addressable market by 67%
Shares of Apple are on the rise after Bernstein Research upgraded the Mac maker and said a new MacBook priced at $900 would broaden the company's potential notebook customer base by 50 percent in terms of both units and revenue.
"We are upgrading Apple to Outperform - while reducing our target price from $175 to $135," analyst Toni Sacconaghi wrote in a research note to clients. "We believe that the stock is overly discounted, that Apple's short-term financials are likely to remain relatively healthy despite economic weakness, and that the company's longer term growth story remains intact."
Sacconaghi turned a particular focus to Mac growth, which he said is the "biggest wildcard among Apple investors today." He said that even if the global PC market remains flat in 2009 and Apple's share gains slow by 25 percent, the company would still see approximately 13 percent Mac growth.
"We feel confident that Apple will be a share gainer, as the company continues to expand distribution and purchase intention remains high," the analyst wrote. "Perhaps most importantly, we expect Apple to lower price points to address a much broader market at some point over the next year."
To this end, Sacconaghi pointed to a recent internal analysis which revealed that a MacBook priced at $900 would expand Apple's addressable notebook market by nearly 50 percent on a revenue basis, and 67 percent in terms of units. Should rumors of a $800 MacBook prove true, it would broaden the company's addressable market by 69 percent in terms of revenue, the study found.
While such moves would undoubtedly pressure gross margins, the analyst notes that the company already factored this into its forecasts when it guided gross margins down 150 basis points for fiscal 2009 even given the expected positive impact from iPhone sales.
"Apple's cost structure has high variable costs, creating less earnings downside risk than many investors may realize," he added. "Given its extensive use of contract manufacturing, Apple's COGS (Cost of Goods Sold) are nearly entirely variable, and operating expenses relative to gross margins are low; the upshot is that Apple's earnings per share suffers less to a given revenue reduction than many of its peers."
In the short term, Sacconaghi said predicting Apple's share price and direction may prove difficult given a number of factors, which could lead to fluctuations between $75 and $135. In particular, he said the company's upcoming revenue guidance for the December quarter could apply new pressure on shares. The Street is looking for sales just shy of $11 billion for the three-month period, but given the company's traditional practice of providing conservative estimates, management could wind up guiding $1 billion below expectations.
Also complicating matters is the difficult compare that exists between the December quarter of 2007 and the December quarter of 2008, namely expectations of a more than 20 percent fall-off in iPod revenues, a tougher consumer spending environment, and the absence of software revenue generated by last year's Leopard launch.
A photo showing the empty shell of what may be Apple's first sub-$1000 MacBook.
Looking a bit further down the line, the Bernstein analyst said he's confident Apple's secular growth story remains in tact. He expects Macs to continue to grow at least 9-10 percent annually, and said Apple TV holds the potential to "act as the centerpiece of the digital home, and could ultimately morph into a capable set-top box replacement."
In the meantime, he believes the company holds a " unique opportunity" to convert its iPod install base -- estimated at 120 to 130 million -- to iPhones.
Shares of Apple were trading up $8.40 (or 8.69 percent) to $105.20 amid a broader market upswing.
An update to Best Buy's inventory system, noted over on our Backpage blogs (RSS), includes six new models with prices inline with today's offerings. There is, however, a question of whether Best Buy is making assumptions, as is sometimes the case, or acting on advance knowledge from Apple.
"We are upgrading Apple to Outperform - while reducing our target price from $175 to $135," analyst Toni Sacconaghi wrote in a research note to clients. "We believe that the stock is overly discounted, that Apple's short-term financials are likely to remain relatively healthy despite economic weakness, and that the company's longer term growth story remains intact."
Sacconaghi turned a particular focus to Mac growth, which he said is the "biggest wildcard among Apple investors today." He said that even if the global PC market remains flat in 2009 and Apple's share gains slow by 25 percent, the company would still see approximately 13 percent Mac growth.
"We feel confident that Apple will be a share gainer, as the company continues to expand distribution and purchase intention remains high," the analyst wrote. "Perhaps most importantly, we expect Apple to lower price points to address a much broader market at some point over the next year."
To this end, Sacconaghi pointed to a recent internal analysis which revealed that a MacBook priced at $900 would expand Apple's addressable notebook market by nearly 50 percent on a revenue basis, and 67 percent in terms of units. Should rumors of a $800 MacBook prove true, it would broaden the company's addressable market by 69 percent in terms of revenue, the study found.
While such moves would undoubtedly pressure gross margins, the analyst notes that the company already factored this into its forecasts when it guided gross margins down 150 basis points for fiscal 2009 even given the expected positive impact from iPhone sales.
"Apple's cost structure has high variable costs, creating less earnings downside risk than many investors may realize," he added. "Given its extensive use of contract manufacturing, Apple's COGS (Cost of Goods Sold) are nearly entirely variable, and operating expenses relative to gross margins are low; the upshot is that Apple's earnings per share suffers less to a given revenue reduction than many of its peers."
In the short term, Sacconaghi said predicting Apple's share price and direction may prove difficult given a number of factors, which could lead to fluctuations between $75 and $135. In particular, he said the company's upcoming revenue guidance for the December quarter could apply new pressure on shares. The Street is looking for sales just shy of $11 billion for the three-month period, but given the company's traditional practice of providing conservative estimates, management could wind up guiding $1 billion below expectations.
Also complicating matters is the difficult compare that exists between the December quarter of 2007 and the December quarter of 2008, namely expectations of a more than 20 percent fall-off in iPod revenues, a tougher consumer spending environment, and the absence of software revenue generated by last year's Leopard launch.
A photo showing the empty shell of what may be Apple's first sub-$1000 MacBook.
Looking a bit further down the line, the Bernstein analyst said he's confident Apple's secular growth story remains in tact. He expects Macs to continue to grow at least 9-10 percent annually, and said Apple TV holds the potential to "act as the centerpiece of the digital home, and could ultimately morph into a capable set-top box replacement."
In the meantime, he believes the company holds a " unique opportunity" to convert its iPod install base -- estimated at 120 to 130 million -- to iPhones.
Shares of Apple were trading up $8.40 (or 8.69 percent) to $105.20 amid a broader market upswing.
An update to Best Buy's inventory system, noted over on our Backpage blogs (RSS), includes six new models with prices inline with today's offerings. There is, however, a question of whether Best Buy is making assumptions, as is sometimes the case, or acting on advance knowledge from Apple.
Comments
But also Gizmodo and 9to5 are showing printout from Best Buy that show the prices are the same. So if they are true, only a new model would perhaps have that price point or it will just be the same as always (which Apple tends to never lower prices, just increase specs.)
Fingers crossed!!!
How many people, realistically, do you know that spend $1500 or so on a notebook? A few. The real share of the market is at the lower end. Apple could win a lot of hearts and minds with a cheaper machine.
$800 MacBook? Bring it on I say.
This article is about $900 MacBooks
/s
You don't like like any criticism so you delete my post?
My comment about you attributing the 8% rise in Apple stock to this analyst's report was fair, in that linking the two was wrong when the the market in general is up and Apple is obviously benefiting from a market rebound and not this analysts.
If you don't like the comment, then state why and argue your logic. Don't just delete the post like a coward.
Still it was wrong to delete my post, and you should have just made the comment that yes, perhaps the linking of the market upswing to the analyst was wrong and that you had removed the comment.
By simply deleting the post with no comment, just builds ill will.
Well I hope the stocks aren't up 8% because of a rumor on the prices going down, because then the stocks may slide tomorrow. Obviously as someone pointed out the whole market is up today.
But also Gizmodo and 9to5 are showing printout from Best Buy that show the prices are the same. So if they are true, only a new model would perhaps have that price point or it will just be the same as always (which Apple tends to never lower prices, just increase specs.)
Nah, the market is up because of the increased liquidity for lenders, the actions of the European and Asian countries and some speculation that the bottom had already been reached.
Personally, I think the market's usual irrational exuberance has been replaced with plain old irrationality.
WOW... I've been advocating that Apple go for marketshare and do a sub-$1000 notebook for AGES. And met with stiff disagreement at every turn most every time I said it.
Now, alluva sudden, it's the conventional wisdom that Apple should do this???
LOL, how times change. Guess I'm just ahead of my time.
And it looks like I may be picking up one of these new MacBooks too, now that Steve has apparently stopped directly injecting overblown margins into his veins. Can't wait 'til the event tomorrow.
...
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WOW... I've been advocating that Apple go for marketshare and do a sub-$1000 notebook for AGES. And met with stiff disagreement at every turn most every time I said it.
Now, alluva sudden, it's the conventional wisdom that Apple should do this???
LOL, how times change. Guess I'm just ahead of my time.
And it looks like I may be picking up one of these new MacBooks too, now that Steve has apparently stopped directly injecting overblown margins into his veins. Can't wait 'til the event tomorrow.
...
Unless I misread the article a 2nd time, I don't see where Apple has indicated that they are going to build a $900 notebook. What the analysts are saying is that Apple would do well to do that. But it doesn't mean Apple will.
If they do, it will be interesting. I doubt it as they like to put themselves in the same places as any "luxury" brand such as Mercedes, BMW, B&O, etc. and do not want to "water down" their brand-image and risk being known as a "cheap" brand like Dell.
*** Update ***
I'll be the first to eat my words. I just read the other article that Walmart may start selling the iPhone. I guess Apple doesn't care about their brand image anymore if they would allow the most scandalous company in the U.S. to sell their product.
It has to disappoint someone!
Someone wants a cheap (with all of the bells and whistles) laptop …
Someone wants Apple to keep making tons of bucks …
Someone wants a kick-ass big laptop, for cheap …
Someone wants new monitors …
Someone wants flash drive iPhones …
Someone wants new desktop units …
Someone wants blu-ray drives …
Someone wants thin …
Someone is fine with thick … as long as it has "this" processor …
Someone will not like the margins …
And the beat goes on.
Apple will NOT please everyone tomorrow, so Apple will disappoint everyone tomorrow, and then - the stock will go down
Skip
Boy oh boy ? another Apple meeting that will disappoint.
It has to disappoint someone!
I'm waiting for the the inevitable disappointed "why no new iMacs/Mac Pros/Monitors/Snow Leopard announcements?" after the "Spotlight Turns to Notebooks" press conference.
I'm waiting for the the inevitable disappointed "why no new iMacs/Mac Pros/Monitors/Snow Leopard announcements?" after the "Spotlight Turns to Notebooks" press conference.
You forgot the "why no update for the Mini?"
...the Bernstein analyst said he's confident Apple's secular growth story remains in tact....
Well so much for the secular growth ? how about the religious growth?
What if if there's no growth in tact and Apple remains no more tactful than at present?
How about AppleInsider does even elementary proofreading?
Nah, it'll never happen.