THE APPLE INVESTOR: Look Out, iTunes, Here Comes Spotify

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murdochThe iPad will save us!

AAPL Continues To Bleed
The stock is off again today, down about $4 to around $254. That’s a 6% decline from the recent high of $267 reached last week. Potential future catalysts include monthly NPD data (Mac / iPod business); international release of the iPad next week (May 10); and the launch of the next generation iPhone (likely June 7) as well as the CDMA / Verizon version rumoured later this year.  The stock trades at 22x estimated fiscal-year 2010 EPS and 12x Enterprise Value / Trailing Twelve Months Free Cash Flow.

iPad Way Better Than Kindle For Publishers, Says Murdoch (Cult of Mac)
News Corp. chief Rupert Murdoch told investors that the Wall Street Journal app is  successful on the iPad and far more profitable for them than similar content on Amazon’s Kindle.. Unlike the Kindle, News Corp. doesn’t split the revenue, taking nearly 100% margin. Murdoch is also using the iPad as a video consumption vehicle. He intends to introduce Sky TV (a News Corp. company) subscriptions for the iPad for live viewing anywhere.

iAd Could Generate Up to $800 Million In Revenue This Year (Bernstein Research)
A.M. (Toni) Sacconaghi at Bernstein Research believes that Apple’s new ad platform, iAd, will be bigger than most investors currently think. He estimates that iAd revenue could potentially reach an annual run-rate of $800 million in revenue by the end of fiscal 2010.  For developers this would generate an incremental 46% – 83% in revenue beyond their existing app sales today. If Apple’s installed base of iPads, iPhones and iPod Touches continues to grow beyond expectations, Sacconaghi thinks his estimates could prove conservative. Toni reiterates his Outperform rating and $300 price-target.

Hold Off Buying AAPL; Market Weakness Isn’t Over (The Street)
Market Movers portfolio manager Ken Shreve advises first time Apple investors not to buy AAPL stock. Investors who purchased the stock back in the low-200s are looking to protect capital and lock in profits. The broader market wasn’t healthy last week and saw large percentage declines. If this continues, Apple could pay a visit to its 52-week moving average at around $234, or a 14% decline from current levels. If there is support for the stock at heavy volume at this level, Ken would be a buyer. However a steeper market pull back of around 10% could send Apple declining to $200 levels.

AAPL Won’t Rise Forever; Gains Like The Last Five Years Are Over (MarketWatch)

Portfolio managers are scared of AAPL, hedge funds don’t want to bet against it and the analyst community is in love with it. Brett Arends at MarketWatch believes that Apple stock has risen too far and is starting to lose its luster. He also isn’t all that impressed with the new iPhone to be released this summer; at least not enough to justify the stock at current levels. Gains like the last five years are unlikely to be replicated. The higher the stock goes, the less attractive it becomes.

Spotify to Give iTunes A Run For Its Money (CNN)
Apple’s first real competitor in the music space will soon enter the U.S. Spotify, a U.K.-based music company, allows users to buy music and sync with a host of gadgets, the iPod being one. Unlike iTunes, Spotify lets the user control the music.  The service features a Facebook tie-in, free listening with advertisements, subscription options as well as an upload feature of existing music into an online library. Sounds great. But even if the user experience is much better, Spotify will have a hard time convincing 125 million paying iTunes customers to switch, especially if Apple does something with the Lala technology.

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