THE APPLE INVESTOR: Goldman Thinks Everyone Else Is Hosed Because Of The iPad

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AAPL hits new high. Getting a lift from strong iPad demand yesterday, the shares are up marginally again today to $246. Upcoming catalysts include March quarter results on Tuesday, April 20 (after close); the international release of the iPad (May 10); and the launch of the next generation iPhone anticipated this summer. AAPL currently trades at the high-end of the tech group at 21x estimated fiscal-year 2010 EPS and 19x Enterprise Value / Trailing Twelve Months Free Cash Flow.

Apple Will Sandbag Guidance As Usual, June Quarter Depends On iPhone and iPad (Deutsche Bank)
Deutsche Bank’s Chris Whitmore believes Apple will beat consensus estimates this quarter, as usual, driven by strong demand for iPhone and Mac units. Whitmore believes that the company will also offer its usual ridiculously conservative outlook for the next quarter.  For the past four years Apple has guided revenue down 3% sequentially but has reported revenue up 4% (on average).  It’s easy to figure out what the company is really expecting–7% above guidance in revenue, 40% in EPS–and we’ll circulate the real expectations next week.  Whitmore believes the biggest swing factor for the quarter will be the release of the next generation iPhone due sometime this summer as well as benefits from the iPad.

Goldman’s Take On The iPad: Everyone Else Is Screwed (The Wall Street Journal)

Goldman Sachs thinks the iPad will leave its competitors in the dust:

  • Apple analyst David Bailey believes the iPad “should further solidify Apple’s leadership in mobile Apps.” He rates the stock Neutral largely based on valuation.
  • Internet Analyst James Mitchell believes the iPad “could marginalize the Kindle,” but other platforms should enable Amazon (AMZN) to retain its lead. Mitchell believes that search will remain the primary navigation tool for queries on the iPad, a non-event for Google (in terms of search that is).
  • Software analyst, Sarah Friar, believes Microsoft’s mobile strategy is still in “show-me mode.”
  • Research In Motion (RIMM) is just completely hosed.

Let’s Play The “How Many iPods Did Apple Sell” Game  (Fortune)
Fortune’s Philip Elmer-DeWitt has compiled an average of analyst quarterly estimates on three of the company’s popular product lines; iPod, Mac and iPhone. This quarter, iPod unit sales estimates range from 11.2 million on the high end to 9 million on the conservative sideMac estimates range from a lofty 52% year-over-year revenue increase to 25%. If NPD PC data is any indication, that 25% is way too low and more likely in the mid 30% range.  iPhone estimates range from 7.85 million to 6 million (the latter is from Citigroup’s Richard Gardner who realises his estimate is too low, he just didn’t change it).  Based on Steve Jobs’ announcement at the launch of the iPad, the 7.85 million estimate is probably close to accurate.

iPad Gross Margins Might Be Less Than Thought (Forbes)
Research firm iSuppli revised its estimate for the cost of building an iPad.  It now estimates the cost for the 16 GB Wifi iPad is $30 more than previously estimated, or $260. This implies gross margin on the new device could be lower than originally forecast. If you factor these new numbers into the Trefis financial model, it implies 1% downside to Apple’s estimated price target of $267. Or in other words, it’s not likely to make a dent in the stock.

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