THE APPLE INVESTOR: iPad Production Fears Overdone, Thinner iPhone Coming And App Store Reaches 500K Apps

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Steve Jobs

AAPL Up With The Rest
Wall Street opened modestly lower on weaker-than-expected manufacturing data this morning. But stocks recovered by midday and are currently trading in the positive. Shares of AAPL are up strong on one analyst’s endorsement (see below). Upcoming catalysts include the WWDC starting June 6; iPad 2 sales updates; the next iPhone launch this fall; smartphone push into China and emerging markets; iTunes and other cloud initiatives; the continued evolution and adoption of Apple TV; and new platforms such as video, books / publishing and social (Ping). Shares of Apple trade at 11x Enterprise Value / Trailing Twelve Months Free Cash Flow(incl. long-term marketable securities).

Apple Stock Is A Buy, Don’t Let The Concerns Fool You (Business Insider)
Piper Jaffray analyst Gene Munster says Apple is still a screaming buy because of these reasons:

  • The stock will move higher on positive earnings revisions “even if the multiple does not increase or goes down”
  • Apple will eventually enter (invent) new product categories which “will unlock new perceived value in the company, and thus the stock.”

  • The WWDC conference starting June 6 will “serve as a near-term catalyst, as expectations for the event are relatively low.”

He believes the stock should trade at a price-to-earnings multiple in the mid-teens given its growth rate.

Wall Street Discusses The iPad Production Impact Of The Fatal Foxconn Blast (Barron’s)
Differing views on the magnitude of the production hit:

  • Brian White with Ticonderoga Securities: Because Foxconn can shift production to another facility, where the bulk of iPad 2 production happens, there is unlikely to be any material impact to iPad 2 production.
  • Sterne Agee analyst Shaw Wu: Believes that concerns that the unfortunate blast will materially impact iPad production are overdone. There are at least two facilities that produce iPads with plans to add more and that production is being ramped up at these other facilities to make up for the potential shortfall.
  • Ben Reitzes with Barclays Capital: He sees little if any impact; while short-term disruptions are possible, the impact should be limited and Ben does not see any risk to his current estimates (6.6 million units in the second quarter). Worst-case scenario would negatively impact iPad 2 shipments in the third quarter, but, again, he doesn’t believe it is likely.
  • JP Morgan analyst Mark Moskowitz: Near-term disruption to the facility’s production and supply is significant, but it could come back on line in the next 1-2 months. Other facilities have some capacity for incremental production, but are already running close to peak capacity due to higher than expected run rate for iPad 2.

Ranges from little impact to…

Apple Could Lose 500K iPad Units This Quarter Due To Explosion (iSuppli)
The recent explosion at one of Apple’s supply chain plants could result in a production loss of 500K iPad’s in the second quarter, according to research firm iSuppli. Total production capacity at the Chengdu facility amounts to about 500K iPad 2 units a month. If the plant is shutdown until the end of June, a production stoppage of half a million units could occur. While most production of the iPad 2 occurs at another facility in Shenzhen, the plant may not be able to compensate for all the lost output. And half a million units is the difference between making iPad estimates, and not.

iOS Devices Are Top Choice For Mobile Video Viewing (The New York Times)
The iPhone, iPod touch, and iPad collectively account for 80% of all wireless video viewing, according to the latest report (pdf) from Internet video ad firm FreeWheel. The iPad, despite its much smaller user base, accounted for 20% of wireless video views, tied with Google’s Android platform as a whole. Ironic, when you think about it considering much of that video is likely coming from none other than Google’s YouTube.

Apple’s App Store Now Has Over 500K Apps (The Loop)
It wasn’t that long ago that Apple first opened the doors to the App Store and now the company has reportedly surpassed 500,000 approved apps. A few fun facts:

  • It would cost $891,982 and over 7 terabytes to download all available applications
  • Approximately 36% of all apps are free
  • Paid apps have an average price of $3.64
  • Over 85 thousand unique developers

All since July of 2008.

iPhones Coming Will Be Smaller And Thinner According To Carrier CEO (All Things D)
France Telecom CEO Stephane Richard said that Apple has agreed on a compromise with wireless carriers to use a smaller SIM card in order to make the next-generation iPhone even smaller and thinner. Apple’s efforts to redesign the SIM card are apparently part of its ongoing quest to free up space in the iPhone and reduce the device’s size.

Google Beating Apple To The Mobile Payments Table (Bloomberg)
Google is reportedly planning to jump-start mobile payments with a press event tomorrow in New York, followed by a trial service in five major U.S. cities. Sprint’s Nexus S could be the initial handset for mobile payment trials. The system would let those with a Nexus S 4G on Sprint use their devices to both buy goods and use coupons by waving the phone at a Verifone-supplied terminal. Google would beat Apple to the punch as rumours continue regarding NFC capabilities in the next-gen iPhone assumed to launch in September (join the SAI discussion). Read more about Google’s launch at Business Insider.

EXCLUSIVE: Interview With Apple’s First CEO (Business Insider)
When Steve Jobs and Steve Wozniak founded Apple in 1976, they couldn’t be trusted to run the company. So, Mike Markkula, Apple’s first investor, and the man who guided the company early on, brought in a CEO to do the adult things needed to keep a company running – Michael Scott. Jay Yarow at Business Insider has all the insight into Apple’s early days.

CHART OF THE DAY: Who Bought And Sold Apple Stock Last Quarter (Business Insider)
Fidelity, Apple’s biggest shareholder, dumped a fairly large amount of stock, ~1.9 million shares. That said, Capital Research Group loaded up on Apple’s stock buying 3.7 million shares, which is a 50% increase in its position.