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Wednesday, September 13, 2006

Calls of Note Part 1

- After going through the broker chatter following Apple's (NASDAQ:AAPL) new product announcements, I think Merrill Lynch's note sums it up best:

Merill thinks the improvements to the iPod line, though incremental, are enough to keep Apple's devices ahead of competitors in feature-adjusted price/performance in the intermediate term. Apple did not announce a full-screen touchless interface iPod, nor WiFi support for iPods, which may be disappointing to some investors with more aggressive expectations, though the firm expects these innovations to emerge in coming quarters. As expected, there was no iPhone announcement, though they continue to expect it by C2Q07. The preview of the coming iTV media hub (available 1Q07) and addition of movies to iTunes make the portfolio more complete and increase the probability consumers may chose Apple as the media management device standard.
They are raising their price objective from $72 to $88 on higher estimates and on view that the combination of existing and coming products is likely to create earnings power in excess of $4.00. For instance, they estimate each point of mobile phone market share could drive about $0.35 NOPAT/share. If Apple were to achieve mobile phone share equal to its PC share, it could eventually add more than $0.90 to the run-rate of consensus estimates of approximately $3.09 in F2008.

Firm is raising their F2008 EPS estimate from $3.17 to $3.54 to reflect one point of share in mobile phones, net of iPod cannibalization. Maintains Buy.

Notablecalls: AAPL stock was among the laggards yesterday as there had been too much hot money chasing it higher ahead of the event. Just as JP Morgan noted yesterday, AAPL has several qtrs of upward EPS revisions ahead of it. I don't have a clear view of what the stock will do in the very s-t but I suspect it will move higher in the coming weeks.

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