Apple's Not A One-Trick Pony

Jul. 3.07 | About: Apple Inc. (AAPL)

With all the hoopla surrounding the iPhone release this past Friday, Apple (NASDAQ:AAPL) saw 525,000 units fly out the door. By all measures, an impressive first three days of iPhone sales. By reading many blogs, articles and other talking-heads, you would think that Apple is a one-trick pony. Wrong.

For Apple's June 30th quarter, and the following two quarters, the story will be the new Mac computer and its capturing market share. With the release of the Window version of the Safari Internet browser, Apple is appealing to a segment of the market it did not have before. This market-expansion will serve Apple well with incremental sales of both hardware and high-margin software.

Many members of my web site have been asking me about Apple's iPhone revenues and its impact on the near future? Apple will recognize iPhone revenues over the 24 month contractual commitment that customers sign-up for. In other words, Apple will book hefty cash-flow, create a deferred revenue line and build the magical music to investors ears: VISIBILITY.

Apple will basically recognize about $75 per iPhone sale, per quarter. Also, Apple has CONSERVATIVELY guided the Street that it expects to have 10 million iPhones sold by the end of 2008, or about a 1% market share penetration. With 525,000 sold in the first weekend, they are well on there way to the 10 million!!

Apple's revenue and earnings have exceeded analysts expectations this past year and a half. With the June quarter results coming out July 25th, do not be surprised to see more of the same. The momentum behind Apple's Mac computer, software, iPods and now the new iPhone is tremendous. My December 2008 price target for Apple's stock is $180-200. I expect Apple will earn a solid $4.25-4.50 per share for Fiscal year September 30, 2008. Come next June/July investors will be focused on fiscal year 2009 numbers. Apple could very easily support a $5.50-5.60 EPS for fiscal 2009. Hence, the price target of $180-200.

AAPL 1-yr chart:


Disclosure: none.