Apple Should Rise on Bold Citi Call

Citigroup is raising their estimates on Apple (NASDAQ:AAPL) to a new Street high. Firm now expects $7.0B revenue (prev $6.9B, consensus $6.95B), 36.5% GM (35.2%, ~33.5%), and EPS of $1.23 (prev $1.14, consensus $1.06). New 1CQ08 rev and EPS ests reflect solid PC sales and, more importantly, sharp ~40% declines in DRAM/flash pricing.

Citi now expects PC unit shipments of 2.1M (+38% yoy) versus our prior estimate of 2.0M and consensus of 2.06M, with upside coming from Mac Pro desktops and MacBook Air notebooks. They now expect iPod unit shipments of 9.5M versus prior estimate of 10.0M and consensus of 10.5M; iPod should struggle until the line is refreshed in 3CQ.

They continue to expect iPhone unit shipments of 1.5M despite the impending 3G iPhone launch.

Citi expects Apple to guide 2CQ revenue flattish sequentially, gross margin down sequentially, and EPS down sequentially, none of which should shock the Street.

Reiterates Buy and $212 target. AAPL remains their Top Pick.

Notablecalls: Note that Citi's $1.23 EPS estimate is the new Street high. That's a pretty bold move by Mr. Gardner. Should drive at least 2-3 points of upside in the stock early on.

Comments

[Rob L:]

I'll feel vindicated if Apple has some blow out numbers. It'll prove that the selloff was way overdone. Better buy now people, we're going to see a 10% POP come after hours on Wednesday and through Thursday!!!!

2008 Apr 21 08:07 AM

[digivision:]

doesn't look like a very bold call to me , DRAM prices are like a discount
and Mac sales are very strong .. it's time for people to realize Apple is less likely to suffer form lower ipod sales

2008 Apr 21 08:51 AM

[Anthony Dad...:]

I agree. This stock should see a 10 -15% pop after earnings. My 12 mos target is $250. If we get lucky and economy bounces could see $300. thecreatingwealthblog....

2008 Apr 21 09:48 AM

[TanToday:]

Seems like it is a COVER YER BUTT week for the analysts.

It could NEVER be, that they were all just plain WRONG, in trashing the stock over the past few months, spreading unfounded rumors, and missing out on EVERY SINGLE positive continuing momentum on ALL the product lines?

Funny how the same ones that were TRASHING Apple, are now frantically UPPING their "projections" AFTER the quarter closed, isn't it?

NONE of them, not one, understands the SYNERGY of the Apple program, from stores, to online, to ITunes marketing, to iTV, to the blowout sales of the desktops and laptops.

ALL of them, without exception, seem to see this as INDIVIDUAL market segments, instead of seeing the software feeds the hardware, the music feeds the software, the phone feeds both the software and hardware, and the stores are simply blowout unbelievable, turning in the highest sales per square foot ever recorded for retail, at $4/SF.

Jobs etal have created THE machine, THE entertainment vehicle, THE glamor and glitz, THE wannahave everything.

The day that THAT sinks in, the SYNGERGYSTIC SYMBIOSIS SYNDROME, is the day that everyone will suddenly see things in an entire different light.

Odd that the USER forums all know this, and they are normally just laypeople, but the highly paid drones in cubicles churning out SPREADSHEETS, haven't been to the user groups, nor I would speculate an Apple retail location.

If you want to see the $$<MONEY>$$ flows, go visit an Apple store, anywhere, any day. Contrast that to ANY retail store in the same venue, and if they don't have 4X the number of customers than anyone you see, short the stock. IF however, your own eyes prove this is true....

... Well, there comes a time when the Tectonic Plates of reality rearrange themselves, and this is one of them.

2008 Apr 21 10:54 AM

[Werlingdervish:]

Beware of wall street's consensus calls on Apple. Last quarter was Apple's best report of year over year earnings, but Apple fell 10% on the quarterly report because wall street mis-interpreted Apples iPod future projections (not to mention Citicorp writting down $10 billion in the same day).

Apple has had a largely successful run-up in recovery since bottoming at $118. It is now the darling of both wall street and Apple enthusiasts so expectations are very high. Market timers are certain to sellout Wednesday or Thursday morning latest. The pop may become a blowout. Personally, I will put a stop loss on my gains and wait till Thursday to see if I can buy back in when everyone realizes that Apple has only met what most people expected--very good earnings. At most will I will lose a few dollars, but better a few than the 10 % loss in January.

2008 Apr 21 11:02 AM

[Werlingdervish:]

For a better analysis of Apples first quarter and the hit that Apple Investors took link to: apple20.blogs.fortune..../

2008 Apr 21 11:17 AM

[Reid B.:]

Can we not have Mac fan bois cluttering up the boards please? Some of these posts are ridiculous. Koolaid is served down the hall for cults.

2008 Apr 21 12:32 PM

[TanToday:]

Fan=boi's, or boyz, or boys.....

Are that way for a REASON, and they spend a LOT of money.

So, go invest with the banks, and play "contrarian" all the way into the outhouse.

Seriously .. INVESTORS need to check out a few of the hopping active Apple discussion sites, some of them are doing "hits" like a Macau casino on Lucky Dragon Day.

Here is a good place to start:

forums.macrumors.com/

2008 Apr 21 03:09 PM

[Jon T:]

Count me in as a cult member if thinking Apple has an incredible business, gorgeous products and with an upside to the shares the size of the sun...

2008 Apr 22 08:32 AM

[Neil Anderson:]

The sell-off was certainly unjustified.

2008 Apr 29 11:35 PM