THE APPLE INVESTOR: Wall Street Pounces On Stunning iPhone Sales News

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Heather Leonard

AAPL Keeps Rising
Shares of AAPL up again this morning as Steve Jobs suggested that iPhone sales exceeded expectations in Q1. Apple currently trades at the high-end of the tech group at 20x estimated fiscal-year 2010 EPS and 19x Enterprise Value / Trailing Twelve Months Free Cash Flow. Catalysts down the road include March quarter results on Tuesday, April 20 (after close); March NPD data on Mac unit sales; and the launch of the next generation iPhone this summer.

Wall Street Jumps On Steve Jobs Hint About Massive Second Quarter iPhone Sales (Barrons)
At the unveiling of the iPhone OS 4 yesterday, Steve Jobs said the company has sold 50 million iPhones. This suggests Q1 sales were about 7.8 million, in line with the most bullish estimates on Wall Street and well above the 6.5 million consensus.

  • ¬†Credit Suisse analyst Bill Shope recently revised his iPhone sales units forecast to 7.41 million in the quarter and believes his number is “fairly close to actual shipments.” He also believes third and fourth quarter estimates are conservative. Apple is Shope’s top stock pick (he is telling investors to continue to build positions). Shope reiterates his Outperform rating and 12-month price target of $300.
  • Citi’s Richard Gardner is at the low end of consensus estimates for the quarter (6 million iPhone sales).¬† Gardner says that for every 1 million iPhone unit sales, Apple adds approximately $0.28 to EPS (12% gain). Since the company implied it has sold between 7 – 8 million during the quarter there could be upside to Gardner’s estimates of $0.28 – $0.56. However, Gardner did not officially change estimates.

The Cat’s Out Of The Bag, Here’s What You Can Do On The New iPhone OS (Business Insider)
In case you missed the announcement yesterday, Steve Jobs outlined what’s coming in the next version of the iPhone operating system. He said there will be 1,500 new APIs (application programming interface) for developers. Of which, he highlighted seven big new features:

  • Multitasking
  • Folders to organise apps
  • A unified inbox
  • iBooks is coming to the iPhone
  • More features for the enterprise
  • A social network for gaming
  • Mobile advertising with iAds

iAd Success Will Be Limited Because It Is A “Self-Interested Service” (paidContent)
David Kaplan at paidContent believes Apple’s new ad platform, iAd, will be limited for two main reasons: 1) “the lack of standard metric for mobile advertising” and 2) the fact that it is an “app-centric” platform. The lack of standard could be one reason why mobile advertising remains fairly immaterial. The other big obstacle is that iAd is based on applications and Kaplan argues that a majority of smartphone users don’t use an iPhone. Fine, but 50 million iPhone units sold with another version launching this summer isn’t too shabby. Just wait until the Verizon iPhone is launched. We should also point out that most ads are built in Flash, currently unsupported by the iPhone.

Apple Is Going To Crush Google In Mobile Advertising, Argues One Pundit (mocoNews)
Steve Jobs said that most people don’t search on their phone by using a web browser, the bread and butter of Google’s business. Instead they are using applications – the foundation of the iPhone. The fundamental difference with iAd versus other mobile ad platforms is that it is built into the operating system, providing developers another revenue stream beyond download sales. iAd will be available this summer for the iPhone and this fall for the iPad. Maybe by then we will know the fate of Google / AdMob.

In Its Quest For World Dominance, Apple Will Take Over The Gaming World As Well (CNBC)
Yesterday, Apple also unveiled its new Game centre in it’s effort to take over the $10 billion gaming market. Features include; automatic in-game matchmaking (which allows players to easily find one another), leaderboards (compare scoring) and achievements (for the braggarts out there). All of these features have proven successful for other gaming leaders, Microsoft (Xbox 360) and PlayStation 3 (Sony). These features could attract new gamers as well as convince those that haven’t participated.

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