Apple: Huge iPhone Demand In Sight

Shebly Seyrafi, an analyst with Caris & Co., this morning raised his price target for Apple (AAPL) to $115 from $110, asserting that iPod sales in the June quarter should be up from the March quarter. Seyrafi says he now sees iPod units in the quarter growing to 11.9 million units from 10.5 million in Q1; his previous forecast called for a decline to 10 million units.

Seyrafi says his checks come from the hard-disk market, which means strong demand for the video iPod, which he says is between a quarter and a third of total iPod shipments.

Seyrafi notes that there continues to be speculation that Apple will switch some video iPods to NAND flash later this year.

Meanwhile, Seyrafi says Apple’s recent warning that gross margins will decline from 35% in the first quarter to 32% in the second quarter due to more stable NAND pricing could be conservative. He notes that NAND pricing “has been more aggressive in the past few weeks.”

He also sees upside for the iPhone, and suggests that his already startling numbers could be too low. Seyrafi expects 17 million units in fiscal 2008 and 25 million in fiscal 2009 - remember that Apple CEO Steve Jobs had predicted getting to 1% global market share, or about 10 million phones, in the first year.

Seyrafi raised EPS estimates to $3.52 from $3.43 for the September 2007 fiscal year; to $3.73 from $3.54 for ‘08, and to $4.42 from $4.21 for ‘09.

Apple shares, which jumped $3.11 yesterday on very little news, this morning were down fractionally in early trading.

Comments

[Julian Ivan...:]

Not to mince words, but if AAPL sell 17M iPhones in FY08, and 25M in FY09, then AAPL will be at $300 by end of 2009 and that analysts earnings estimates will prove to be about 75-100% too low. He's missing out calculating for iPhone subscriber revenue sharing, iTunes Store growth, Mac sales growth, and the AppleTV.

Good on Caris & Co for "doing the maths" with regard to iPhone sales numbers - I think he's spot on (perhaps a bit too conservative still though) - but naughty, bad, delinquent analyst for not working out the impact on revs and earnings from this. They're laughably under.

2007 May 08 09:03 PM

[Tom B:]

Life is good! Let's hope they don't have a scratchable surface or battery problems or some other annoying little issue.

For my part, I see the iPod and iPhone as lures to get people in the Apple stores and looking at the Mac computers. At about 6% marketshare, I see enormous growth potential, especially if Enterprise ever decides they are fed up with all those Windows support and security issues.....

2007 May 09 08:33 AM

[Stefan Wyler:]

Aren't those + $0.29 per share very conservative for the next year (2008) ? Why is their estimate that low? I think iPhone alone could lead to those $0.29 but they will also have a great lineup of computers and other devices such as iPods and Apple TV.

2007 May 09 11:45 AM