|
By Heather Caspi
July 2005
 Financial
analysts are forecasting promising performance this year from Apple,
thanks to the continued popularity of iPod music players.
While Apple is riding high after dominating last year’s
gift season, however, some suggest the company’s success could
be limited by a small fan base and increasing competition from new
products.
Analysts are watching for the “Halo Effect”
to see whether iPod sales will lead to increased interest in Apple
products overall, or whether Apple’s popularity will peter
out after the iPod boom draws to an end.
Apple has surpassed financial expectations this year
and has seen its stock gain more than fivefold since early 2003.
However, Caris & Co. analyst Mark Stahlman said that he believes
the limits of the company’s “startling” turnaround
success are being tested, the Associated Press reported.
“... There is a sense that the current enthusiasm
might have overrun the realities,” Stahlman wrote in a research
note. “Apple has a way of surprising on the upside as well
as on the downside.”
Stahlman believes that further iPod domination is
unlikely for the next holiday season due to a wave of new video
game systems expected to flood the electronics market later this
year, as well as the launch of several alternatives to Apple’s
iTunes music store.
He said it is possible that ongoing demand for the
iPod will raise interest in Apple computers, but believes that there
will remain a rift in how people use computers, and between Macintosh
and Windows-based machines. The Mac Mini, however, could generate
some interest, he suggested.
According to the Associated Press, “We admit
that it’s possible,” Stahlman said. “But over
the past few months, we have become less confident that this is
likely.”
Stahlman lowered his rating on Apple to “Average”
from “Above Average,” adding that rival Microsoft Corp.
will soon reveal a new version of Windows that addresses the operating
system’s major security shortcomings.
Gene Munster of Piper Jaffray also suggested that the ongoing demand
for the iPod is what is fueling much of Apple’s recent success.
It remains the “must-have digital music player,” with
more than 10 million already sold, reported AFX Financial News.
However, Munster said it is time for investors to
view the iPod as something that is building demand for the entire
Apple product line.
He was more optimistic than Stahlman, estimating that
more than 30 million iPods will have shipped by the end of 2005
and will have secured the effect of boosting other Apple product
sales.
“Apple’s domination in digital music is
a critical piece to the story,” Munster wrote in a research
note. “But we don’t believe that iPod is the only potential
growth avenue for the company.”
According to AFX News, Munster added that channel
checks of other Apple products showed greater demand for the iMac,
PowerBook and Mac mini computers during the quarter.
 AFX
News also reported that research firm Goldman Sachs expects Apple
to beat Wall Street estimates in what is typically a weak quarter
for consumer spending.
Due to demand for the iPod, the Mac mini and the PowerBook,
Goldman Sachs raised its second quarter and 2005 earnings per share
estimates to 27 cents and $1.19, from 24 cents and $1.12.
Goldman Sachs also raised its fiscal 2006 and 2007
earnings per share estimates to $1.34 and $1.54 from $1.28 and $1.48.
According to Goldman Sachs, valuation metrics assume
continued earnings acceleration for Apple and are already 50 percent
above those of Dell. However, the research firm said Apple shares
will need a greater catalyst to move higher, “one which we
are unable to foresee.”
Also in April, First Albany raised its earnings and
revenue forecasts for Apple.
Analyst Joel Wagonfeld lifted his fiscal second quarter
earnings estimate to 25 cents a share from 23 cents, and his revenue
forecast to $3.5 billion from $3.3 billion . Wagonfeld also raised
his iPod unit sales estimate to 5.5 million from 4.5 million, and
his iPod revenue estimate to $1.3 billion from $1.06 billion.
An even more optimistic forecast comes from Bloor
Research, which asks the question, “Is Apple about to become
an industry giant?”
According to Bloor, the success of the iPod does appear
to be stimulating Apple’s computer sales because IDC reported
25 percent growth in Apple’s worldwide shipments of PCs, compared
to 13.7 percent for the market as a whole.
“Apple is beginning to look like it is going
to fulfill its commercial potential,” Bloor reported. “All
the signs are there."
|
