Monday, July 02, 2007

Color on Apple's iPhone launch

We have several tier-1 firms out positive on Apple (NASDAQ:AAPL) this AM:

- Piper Jaffray spent Friday evening at Apple stores in New York,San Francisco, and Minneapolis, quantifying the iPhone launch. According to rough estimates they believe Apple sold 500k units over the weekend, which wouldprovide upside to their estimate of 200k units in the June quarter. Overall, Apple met strong demand over the weekend with adequate supply. PJ was surprised by the rate at which Apple was able to sell the handsets, with 50 cashiers processing up to 1,000 iPhones/hour in some stores. Also, the setup process involved some hiccups, but the touchscreen, keyboard and battery life are better than they expected. Maintains Outperform and $160 tgt.

- Goldman Sachs notes Apple's iPhone launch, which started on Friday, blew through expectations that have been climbing since January when the product was announced and provides another example of Apple's ability to bring dramatic change to an industry. They now think that Apple unit sales over the weekend were at least double their prior 350,000 estimate (Apple's June quarter ended Saturday so Sunday's sales will show up in September quarter results) and they have increased their iPhone forecast to 5.25M for calendar 2007 and 12M for 2008, up from 4M and 10.5M, respectively. 2007 and 2008 EPS estimates go to $3.58 and $4.30 from $3.52 and $4.08 - still with the bias firmly to the upside.

GSCO is leaving their price target at $135 but they think all of Apple's key products - especially iPhone and Mac - have an opportunity to show upside over the next couple of quarters, keeping the stock firmly moving ahead.

- Morgan Stanley says they have strong conviction in their higher earnings forecast relative to consensus and continue to view Apple as a top pick in their group. While the success of Apple's iPhone won't be determined anytime soon, the successful launch over the weekend is indicative of their positive thesis. Perhaps the most important takeaway from initial research is Apple's ability to drive customer traffic, and therefore margin leverage, in its retail stores. If sustainable, they view their bull case of $7 C08 EPS and $225 stock price as more likely.

Notablecalls: I think AAPL will dictate the overall sentiment over the next couple of days or even more. If AAPL gets sold on this positive gaga, it won't be because of activation issues. This will send a clear message to the market we are headed towards lower levels.

Frankly, I have no feel for AAPL here. Sorry.

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