Apple: Rumors Keep On Coming, But Numbers Will Surprise

Editor's note: The report by FBR analyst Craig Berger, quoted in this article, did not comment on Apple sales, but rather on device builds; some inferred from Berger's report that Apple sales would also be down.

Once again Apple (AAPL) gets hammered in the press. This time by Craig Berger, FBR analyst, who figures that second quarter 2008 unit sales of iPods and iPhones will be down 60% and those of macBooks will be down 50% from last quarter's results. He arrives at these estimates by gauging Apple's suppliers. He believes the component sales are way down. This story was repeated throughout the web and ultimately appeared in the Business Week edition of February 25, 2008 deflating the spirits of Apple stock holders and helping to crush share price.

But before investors lose too much heart, consider the following:

Q2 unit sales traditionally do go down after the booming holiday season. It's awfully hard to match those Christmas iPod gifts in January through March. iPod sales are seasonal. Look at 2007 unit sales for the iPod. They went from 21 million in Q1 to 10 million in Q2 for 2007. A drop in iPods is expected; anything otherwise would be very unusual. While Berger's prediction is disappointing, a 50% drop off for iPods is part of the seasonality of the product line; his 60% drop is bleak, but not as bad when you factor this in.

The sale price of iPods is increasing as the product line develops. iPod unit sales from Q1 2007 to Q1 2008 grew at 5%. However, sales revenue overall climbed 17% because the revenue per unit increased. Even if the units sold decreases, the total sales revenue will help make up the difference. Selling the iPod Touch is alot more profitable then selling the older, less expensive models.

Berger uses information he gleamed from looking at Apple's vendors to estimate its sales. Apple uses multiple and changing suppliers for its components. In addition, these vendors don't provide much information regarding their Apple sales. It would be extremely hard to get an accurate read on sales trying to use this approach.

The Street seems to only look at Berger's low iPod, iPhone, and macBook prophecy. It misses the surprising iMac prediction. This may be the real story of the piece. Berger forecasts a 35% increase in unit sales of iMacs over last quarter. This would be astounding. Last quarter Apple sold 977 thousand iMacs. Berger suggests over 1.3 million iMacs will be sold. That number is huge. It already comes after a whopping iMac first quarter. If the Street believes the first part of Berger's research, then it stands to reason it would trust his iMac prediction. If Berger is right on the iMacs, that would an extraordinary quarter for desktop sales.

Analysts traditionally shoot at Apple in January. This is nothing new. In January 2006 they did the same thing. At that time Apple traded at $80. By June of that year, after lots of dire forecasts, the poor stock was limping along at $50. If you had despaired and listened to the all the disparaging analysis, you would have missed a big move up. By December, Apple had climbed to $91.

Well, they are shooting again. Apple is in the trenches but it's not done, it's simply reloading. The pundits will misdirect, inaccurately call the numbers. But Apple will once again surprise to the upside. And, if history is a guide, those holding the stock at current prices will be amply rewarded.

Disclosure: Long AAPL.

Comments

[mobius]

What does this mean; today is the 18th Feb.

"This story was repeated throughout the web and ultimately appeared in the Business Week edition of February 25, 2008 deflating the spirits..."

[Yodarick]

What it means is that all these silly pundits don't know what they are talking about. Everything is rumors, nothing is fact. Those investors with deeper pockets than mine seem to make their decision based on that kind of information, thus the position of Apples shares today.

I base my decision on past performance, the last quarter report, the best in Apple's history. If I had deeper pockets I'd be buying more today.

When all the lemmings run to one side of the boat I go to the other side.

[kiwiiano]

One can but wonder if these 'pundits' are talking the stock down so they can quietly stock up while the prices are low. The pattern of consistent errors is just too regular.

[Brewer]

Absolutely. They are trying to 'shake out the weak hands'. It would be rather foolish to sell at this point, IMHO.

[europeaninvest]

Business Week dates its print edition February 25, 2008. Don't know why they do that, but they do.
Glad to see others recognize the pattern with sour predictions in January-February.

[digivision]

it's a pattern for sure and it's simple manipulation they ran the stock up, at $200 they sold and now they ran the stock to $120 , I am not sure they are done yet I wouldn't be surprised if they'd let Apple lower another 8-15% but I can assure you buying will resume as usual as soon as they are content.
Notice they never find anything wrong when they are in profit mode
on the other hand when they need to buy they will find anything to disrupt the flow .. this is traditionally a slow quarter for Apple all they had to do is emphasize this and the mass selling begun

[wayne thompson]

People that write these kind of articles based on rumors about any product are just hurting the stock market and the economy remember the email that sent apple stock down that was false. If enough articles were written about many companies we would be in a depression.

[dithers]

the stock market is corrupt, George Bush is a war criminal, the American Dream is a cruel joke on the masses, and 911 was a scam of horrific proportion.
No-one cares.
Its all about manipulation and power over others.
One day a new leader will come and shut down these abominations and people wll see that we have all we need and that so much of what we desire is simply based on hypnosis by the evil advertising world.

Have a nice day.

[reagan]

"9/11 was a scam?" Please go blather on another blog,you idiot.

[MacManMaz]

It is not Xmas, nor is it back to school, and Apple doesn't have a huge discount sale going on, but my local Apple store was literally packed this weekend. I really have never been at the mall and seen that little store with this many people. I think the wave of iMac sales that started in Sept 07 has turned into a tsunami. The market pundits will learn a valuable lesson about OSX and the popularity of the Mac desktop this spring. Iphones, iPods, and iTunes, are only a part of this juggernaut of innovation called Apple Inc.

[MacManMaz]

BTW dithers,

You would be wise to buy some AAPL stock now. The evil advertising world will help you make lots of money. Then you can waste more of your time posting your insane paranoid rantings about conspiracies.

I am going to enjoy the american dream, thanks.

[No hearsay here]

dithers' post makes me wonder if Fidel Castro hasn't found a new hobby for his retirement years: reading blogs.