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AAPL On Fire As Earnings Approach
Shares of AAPL are trading sideways today after a boost yesterday on a Buy initiation. Upcoming catalysts include third quarter earnings announcement on Monday, October 18th at 5:00pm ET; monthly NPD data (Mac / iPod business); iPhone sales updates and carrier diversification; iPad sales updates and expansion; new content revenue streams such as video, books and social (Ping); and the uptake of the newly refreshed Apple TV. AAPL trades at 16x Enterprise Value / Trailing Twelve Months Free Cash Flow (incl. long-term marketable securities).
Word On The Street (Various)
Wall Street chimes in ahead of earnings:
- Jefferies Starts Apple At A Buy…Surprise, Surprise (Business Week): Jefferies analyst Peter Misek initiated coverage on shares of Apple with a Buy rating yesterday as he believes earnings will surpass current Street expectations. Jefferies set a price target of $365. Apple’s cross-platform operating system, its content offerings and app strategy are helping the company continue to gain market share. Misek pointed to huge addressable markets and relatively low penetration.
- One-Third Of Students Want An iPhone (AppleInsider): Gene Munster at Piper Jaffray recently completed its national poll of students around the country about their interest and buying patterns in mobile phones, portable media players and online music services. According to the results, the percentage of teens that own an iPhone currently sits at 14% (unchanged from last year). However, interest in purchasing an iPhone in the next 6 months rose to an all-time high of 33%.
- iPad On Its Way To Becoming 4th Largest Consumer Electronics Category (CNBC): Apple’s iPad sold three million units in the first 80 days after its April release and its current sales rate is about 4.5 million units per quarter, according to Colin McGranahan at Bernstein Research. This sales rate is blowing past the one million units the iPhone sold in its first quarter and the 350,000 units sold in the first year by the DVD player, the most quickly adopted non-phone electronic product. At this current rate, the iPad will pass gaming hardware and the cellular phone to become the 4th biggest consumer electronics category with estimated sales of more than $9 billion in the U.S. next year. TVs, smartphones and notebook PCs are the current three largest categories.
Long Apple, Google And Apps, Short Financials (Market Watch)
Cody Willard is pounding the table some more; the single best way to profit over the next five to 10 years is to get in front of the App Revolution that’s just getting started playing out before our eyes. The broader market has been on fire recently and all of the major indexes are sitting up close to yearly highs. Apple and Google and various options strategies have been blazing. But there’s one sector of the markets that’s lagging, the financials. They’re are sick. And coughing. And sputtering. And begging for yet more, new welfare programs from the Fed and its weeble-wobble-but-can’t-get-rid-of chairman, Ben Bernanke.
iPhone 4 Not Enough To Stave Off Android (PC World)
Nielsen has once again found that more people bought Android phones in the last six months than any other platform. Apple’s iPhone sales spiked in July, which was the first full month of iPhone 4 sales. Nielsen found that 26% of people who bought smartphones between February and July got an iPhone, compared to 21% between January and June. In August’s survey, recent iPhone purchases accounted for 25% of the market. Android, meanwhile, grabs more of the market every month. By August, Android phones accounted for 32% of all smartphones sold in the last six months.
Apple TV Has A Margin Of Around $35 (iSuppli)
iSuppli published the results of its Apple TV tear down, which found a total preliminary estimated production cost of $63.95. The most expensive component was estimated to be the custom-built A4 processor at $16.55. The Toshiba-supplied 8GB of internal memory is the second costliest component of the set top box, with an estimated cost of $14. And the Wi-Fi module, which includes a deactivated Bluetooth chip, is another $7.65. Though the device sells for a low $99 price point, that still suggests a margin of 35% on each box.