Analysts See Buying Opportunity in Apple

Although Apple Corp. (AAPL) shares have declined substantially since announcing new product and service offerings at the MacWorld Expo and Conference on Tuesday, the freefall has created a prime buying opportunity for investors as the company heads into next week’s earnings release, according to several analysts.

While there were no iPhone-like blockbuster announcements made by chief executive Steve Jobs, the company’s successful product cycle and upcoming pipeline are enough to convince analysts that Apple is on strong financial footing.

In a note to clients, Goldman Sachs analyst David Bailey said:

While we expect many of our companies to report solid December quarter results, the broad-based strength of upside from Apple should enable it to stand out. At the same time, Apple’s multiple product cycles, something that is sorely missing among our enterprise facing companies, should support the stock even as we enter a softer seasonal period.

Another encouraging sign was Mr. Jobs’ announcement that Apple has moved 4 million iPhones off store shelves, including about 2.5 million in the most recent quarter that beat consensus estimates of 2.2 million, said RBC Capital Markets analyst Mike Abramsky.

Mr. Abramsky said that Apple now is second to Research In Motion Ltd. (RIMM) in the smartphone market with 19%, and its growth is an affirmation that the “iPhone experience taps into pent up consumer need for mobile content.”

Finally, the introduction of a movie rental service is a step in the right direction, said Citigroup analyst Richard Gardner, but the rental price is more expensive than Netflix (NFLX) or Blockbuster (BBI), and would be available online 30 days after being available on their competitors.

Mr. Gardner said:

We clearly view the new iTunes movie rental service as a long-term positive for Apple because we believe the availability of more and better video content will drive iPod sales and upgrades over time. However, we do not expect iTunes movie rentals to contribute significantly to revenue or, more importantly, operating income during 2008. In fact, we would not be surprised if Apple agreed to give movie studios a larger cut of rental profits than they are accustomed to receiving in exchange for more content and/or quicker access to content.

Comments

[Thomas A, G...:]

I agree, these few days of trading has opened a buying opportunity for apples stock. the stock at this point is why undervalued and with the up coming earnings on Jan.22, we could see some major upside on the stock price. The key to the earnings is the forward guidance apple gives. This could allow apple to go why over 200 dollars a share. I also believe that they will announce a stock split and announce more carriers for the Iphone. It all is good for Long term Apple shareholders.

Thomas A. Gaughan

2008 Jan 17 06:03 AM

[digivision:]

more carriers?? I doubt it this Jan 22nd is about earnings and guidance
which will be lower than what people might think

2008 Jan 17 09:06 AM

[User 141198:]

Apple will guide conservatively, as usual. Probably under $1.00 a share and this will temper the reaction to the strong numbers expected for the December quarter. With all due respect to Thomas', $200 seems unlikely anytime soon given overall market conditions and anticipated weakness from the consumer. However, Apple's growth story and innovation remain very much on track and the next six months may represent an outstanding accumulation opportunity for investors willing to hold through 2008 when increased market share and deferred revenue numbers should propel eps to lofty levels. If the economy and overall markets are back on track in 2009 and AAPL's multiple rewards its growth record and prospects, the stock could be trading in the $300s and upward. This company has a great story that remains in tact.

2008 Jan 17 10:25 AM

[Ricker:]

Movie rental business..........clea... the current guidelines are what Apple wants inorder to make the most money. However, given that, it is only a starting point. Granted, there are those people that rush out to Blockbuster to get the newest movie but the vast majority of movie viewers don't. So, who cares if they do not get the movie for 30 days. Look at the top 100 on Netflix. There are some movies in the top 25 of that top 100 that are a year old. Now, what does that tell you? And, if Apple wanted to they could negiotate with the studios, pay alittle more, and give it to you the same day Blockbuster and Netflix gives it to you. But why start there? I think Apple has a well thought out strategy here in place. A few things will change however. The 24 hours viewing has got to go to 72 hours, perferrably 7 days. And the 30 days from purchase is just stupid. Give people 6 months, come on, who cares anyway, Apple has the money in the bank, right? The customer has paid! One thing for sure, Apple has all the money in the world to get the right people. And these people are smart, really smart. And the consultants that they pay to watch over the decision makers are smart too! Finally, just a simple note on the iPhone vs. the Blackberry. The gap will start to close. And that is because Apple has more than just a phone in the arsenal. That iPhone will be a mini computer, linking to all of the other products that Apple has now and in the future. The iPhone is going to be like a "key" to everything that you do. Even your credit card will be history. The Apple iPhone will be your debit card, your credit card, and much, much more. Where will they put the scanner bar? What will the future be like in 5 years with this company, Apple. I know, Disney will tear down the Matterhorn and replace it with a big Apple. OK, well maybe not, but look forward to the Apple castle. A playground for kids of all ages.

2008 Jan 17 07:19 PM