Thursday, February 08, 2007

Apple (NASDAQ: AAPL): JP Morgan cautious on iPod shipments

- JP Morgan continues to be cautious on Apple (NASDAQ:AAPL) after a visit to Apple's headquarters in Cupertino, California. Firm notes that while the overall tone of the meetings was positive, most of the positive commentary was focused on the latter part of the year and the iPhone.

Retail momentum should improve after last quarter's decline in iPod growth. CFO Ron Johnson was very pleased with the momentum of the Apple retail stores, and reiterated that last quarter's average store revenue declines were an anomaly caused by the broader availability of iPods at third-party retail partners. He believes this distortion was largely a one quarter event.

Management cautioned investors not to limit the addressable market opportunity to Cingular's
current installed base. The company believes the iPhone will bring new subscribers to the Cingular network and international carriers will represent a healthy portion of the market.

Firm notes their concerns over slower Mac share gains and near-term iPod pressures persist. They believe the recent quarter's disappointing Mac shipments added risk to the story. In addition, as we enter the seasonally weaker period of the year, the firm remains concerned that iPod shipments may disappoint investors' heightened expectations.

They believe this risk is particularly pronounced given concerns that some consumers may delay iPod purchases ahead of the iPhone launch. As a result, the firm believes it may be difficult for the shares to outperform the peer group average, and are maintaining Neutral rating.

Notablecalls: I think these comments may pressure AAPL stock in the early going. While there is nothing really new to be found in the note it does highlight the obvious - the iPod fad is likely starting to fade.

1 comment:

Zig said...

I do believe that iphone will canibalize some of the ipod market however I believe analyst need to look deeper into who is actually using the ipod and who will be using the iphone. Parents use ipods however their children use them more. It would be difficult to garner statistics on how many preteens or younger use ipods. Children have access to their parents credit cards to buy music which is hard to discern who actually is spending the money.

I believe Apple is looking at a different market altogether that includes the PDA crowd. I for one would be interested in a more efficient PDA. One that is simple to use and powerful. I feel that anyone buying an iphone will be a more mature user.