Apple: Estimates, Target Cut on Weak Forecast of iSales

How many iPhones can Apple (AAPL) sell next year?

Piper Jaffray’s Gene Munster, in assessing how many phones the company might sell if the reports of a distribution deal with Wal-Mart (WMT) are accurate, repeated his view that the company can sell 45 million phones in calendar 2009. But Morgan Stanley’s Kathyrn Huberty Wednesday morning asserted in a research note that the Street in general is far too optimistic about the prospects for the iPhone.

In fact, Huberty cut her own forecast for calendar 2009 to 14 million units from 19 million, and asserted that price cuts might be necessary to stimulate demand. She says a Morgan Stanley survey of 2,500 consumers found that “extreme” interest in the iPhone is lower than in the firm’s February 2007 survey, at 5%, down from 7%.

The survey also found that PC purchasing plans for next year are at half the level they were in 2005. And she says that iPod penetration in the U.S. has peaked, and that new purchases by the installed base this holiday season will fall well short of past years, at 6% versus 40% typically. She now sees 2009 iPod unit sales down 30%.

Huberty says it is “increasingly likely” that Apple will reduce the price of the iPhone in the coming months to stimulate demand in a weak market. She says if the company cut the price of the 8 GB version of the phone by $100, and if the service costs came down by $10 a month, units next year could jump to 39 million from her new forecast of 14 million.

Huberty now sees the company selling 4 million iPhones in the December quarter, down from 4.5 million previously; that would be down from 6.9 million in the September quarter.

For Macs, she maintains her 2.6 million units estimates for the Decmeber quarter, but cuts calendar ‘09 to 9.9 million units from 10.8 million. For iPods, she now sees 16 million sold in Q4, down from 17.5 million, and 34.3 million in calendar ‘09, down from 37.5 million previously.

Huberty, who has an Equal Weight rating on the stock, chopped her EPS estimate for the September 2009 fiscal year to $4.37, from $4.70, and reduced FY 2010 to $5.22 a share from $5.97. Her price target drops to $95.

Meanwhile, Pacific Crest’s Andy Hargreaves cut estimates on the company Wednesday morning as well, in his case citing both foreign exchange rates and a “lack of global consumer spending.” For FY ‘09, he now sees revenue of $35.94 billion, down from $38.01 billion; the new estimate would be growth of 10.7% from FY 2008 revenue of $32.48 billion. He cuts EPS for the year to $5.73, from $6.05. On the other hand, he also says that the Street’s gross margin estimates are overly conservative, and says falling component prices will offset the impact of currency on gross margins. Hargreaves maintains an Outperform rating, but cuts his target to $160, from $175.

Apple Wednesday is down $1.75, or 1.8%, to $98.31.

Comments

[BMWTwisty:]

Huberty's a clueless doofus. Period.

2008 Dec 10 12:58 PM

[BSO:]

when Huberty is actually correct about something please let me know. In the mean time i'll be following Andy Zaky for my Apple analysis instead of this overpaid idiot.

2008 Dec 10 03:06 PM

[waf76:]

someone please shoot that bitch

2008 Dec 10 03:56 PM

[peter02l:]

Just six months ago Kathryn Huberty's 12-month price target for AAPL was $210 per share. This is before Apple blew past her estimated in Q4.
He new target of $95 would suggest Apple has completely abandoned the iPhone and the iPod is is only selling computers.

read this: www.appleinsider.com/a...

2008 Dec 11 11:36 AM

[brewer:]

Huberty? You realize she has absolutely no credibility, right?

None of the Apple analysts Wall Street firms use to manipulate this stock are precient. Ms. Huberty has arguably the the worst track record of them all.

Who will you interview next, Eric--the mentally retarded? Michael Dell?

2008 Dec 11 03:22 PM

[No saturation:]

Savitz, you routinely post non-news worthy news in a bearish manner. Not exclusive to Apple. Maybe you should do a little RESEARCH where you will find Morgan Stanley's analyst has been off on Apple estimates, the last few earnings substantially, more than any other analyst. Obviously, someone who does nothing but spout negative (yourself and Huberty)is easier than using a spreadsheet program to run the numbers yourselves. Also, it is clear you forgot that Apple makes computers-their bread and butter and are growing 30% THIS quarter when the "end of the world is nigh". I suggest you maybe shut up until you have something intelligent to say.

2008 Dec 11 04:14 PM

[kris23:]

If they sell the iPhone at Wal-mart there gonna sell a ton. As far as iPods go, Apple knows the market is saturated. That's why its all about upgrades for iPod users. And clearly Mac computer sales are gonna be down, but thats a given with the economy. Either way, investors are still bullish on AAPL (predictwallstreet.com/... in such an emotional market it shows investors are still optimistic about apples next year.

2008 Dec 12 01:09 PM