$900 MacBook would grow Apple's addressable market by 67%

Posted:
in Future Apple Hardware edited January 2014
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.

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Comments

  • Reply 1 of 52
    Wonder if this would bring the base MBP to about $1,800? Doubt it...but I sure hope so.
  • Reply 2 of 52
    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.)
  • Reply 3 of 52
    I think apple will just not raise the specs on the base model on the new macbooks as much and get an 800-900 starting price which can easily go up after you add more ram, cpu speed, etc. But they really need to fill in the gap between the ultra cheap dells for 500 bucks and their cheapest model at 1100
  • Reply 4 of 52
    I just hope they keep the ease of upgrade for the MB - that's one of the biggest factors for me. I can have apple give me 1GB and then order a 4GB set from crucial and if my HD ever gets too small or anything it's just a quick easy job to replace it.



    Fingers crossed!!!
  • Reply 5 of 52
    mimacmimac Posts: 872member
    $800 MacBook? Bring it on I say. It's about time Apple took the bull by the horns and went after the "less expensive" end of the notebook market. There are a hell of a lot of consumers at this end of the market and many $$$'S to be had from them.



    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.
  • Reply 6 of 52
    dr_lhadr_lha Posts: 236member
    Rumors like this are toxic, because everyone is going to decry Apple when it inevitably doesn't arrive, all because of the built up expectation from a rumor that probably has no basis, and now Apple is going to look like the bad guy when fancy new MacBooks are released tomorrow at the same price point as before.
  • Reply 7 of 52
    I don't think we will see a cheaper macbook anytime soon, i do see the cheapest macbook coming with a super drive and a LED backlit screen and staying at the same price, but not price cut, not while Apple can just improve the hardware and leave the price the same
  • Reply 8 of 52
    A story about made up numbers based on made up numbers? Seriously? What's going to happen if Apple DOESN'T hit this fictional price point?
  • Reply 9 of 52
    irelandireland Posts: 17,798member
    Quote:
    Originally Posted by MiMac View Post


    $800 MacBook? Bring it on I say.



    This article is about $900 MacBooks

    /s
  • Reply 10 of 52
    Oh thank you AppleInsider!



    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.
  • Reply 11 of 52
    Looking at the article again, I see you have now removed the offending lines that I was critical off, so that is good.



    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.
  • Reply 12 of 52
    Wow..........$800 huh. I think the red bubble wrap is so cool.
  • Reply 13 of 52
    Quote:
    Originally Posted by UltimateKylie View Post


    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.
  • Reply 14 of 52
    tbagginstbaggins Posts: 2,306member


    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.



    ...
  • Reply 15 of 52
    sflocalsflocal Posts: 6,099member
    Quote:
    Originally Posted by TBaggins View Post




    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.
  • Reply 16 of 52
    nceencee Posts: 857member
    Boy oh boy … another Apple meeting that will disappoint.



    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
  • Reply 17 of 52
    benroethigbenroethig Posts: 2,782member
    A return to the $899 price would be very good for Apple. A larger screen Macbook would be even better.
  • Reply 18 of 52
    dr_lhadr_lha Posts: 236member
    Quote:
    Originally Posted by ncee View Post


    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.
  • Reply 19 of 52
    Quote:
    Originally Posted by dr_lha View Post


    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?"
  • Reply 20 of 52
    neilmneilm Posts: 989member
    Quote:
    Originally Posted by AppleInsider View Post


    ...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.
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