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Research Firms Can't Get Enough Of AAPL
by , 9:25 AM EDT, August 27th, 2004
While shares of Apple have climbed more than 10 percent this week, reaching 52-week highs, two research firms told investors Friday they continue to remain highly bullish about the stock.
Merrill Lynch reiterated its "Buy" rating on Apple, saying it has heard the company is performing well in the higher education market "based on the iPod halo effect, Unix operating system, and brand recognition." Merrill Lynch also said European music store sales and international iPod sales could provide a substantial boost to the company's bottom line.
Piper Jaffray, meanwhile, sees the iTunes Music Store could be the key to Apple's continued growth in 2005 and 2006. "We believe that the Street is underestimating the impact of iTunes on two levels: hype factor and financials," the firm said. "Based on Apple itself downplaying the potential growth and profitability of the iTunes Music Store, we believe expectations related to this segment are minimal."
Piper believes that the hype factor surrounding iTunes will grow in tandem with the installed base of iPods. "As the iPod installed base grows and the overall demand for digitally distributed content increases, we expect the Street to begin to view iTunes as more than just the cog in a wheel that drives hardware sales," it said.
Shares of Apple were trading down a few cents ahead of the opening bell Friday.
The Mac Observer Spin:
It may be hard to see how the low-margins of the iTunes Music Store combined with its comparatively low sales (100 million songs at 99 cents is a very small fraction of Apple's annual revenue) will be the cornerstone of Apple's future revenue, but if digital downloading of music ends is able to capture just 10 percent of future total music sales Apple stands to earn substantially more. Regardless, Apple investors are sitting pretty this week and can start their week-end with a smile -- and anticipation of what Paris might deliver next week.Observer Comments
Fri Aug 27, 2004 9:59 am Subject: G5 & iPod Quality Problems and MS Music Will Sink Stock
Fri Aug 27, 2004 12:07 pm Subject: I'm kicking myself for my APPL buy
Fri Aug 27, 2004 12:13 pm Subject: The Music Store revenues
WHen TMS first came out it was not a money maker - huge investment when you consider the efforts to integrate with iTunes AND port it to Windows. A good investment at the time, however, when you consider the iPod sales.
Today is a different situation. The original investment would has been recovered (or soon will be) and TMS is now in a position of generating profits. As long as the iPod is leading the market it will be feeding new customers to TMS and building revenues. The only caution I see is that a lot of people will move their CDs to iTunes and use TMS to fill in gaps.
It's still a huge market and the only serious competitor I see on the horizon is MS. If they come out with their normal software (like SP2) they will have a very hard time converting iPod users.
It's no use asking the troll questions, guest. He doesn't respond. In fact he probably doesn't ever come back to a story after he drops his load.
Think of him as an extremely ugly Chatty Cathy Doll. You can pull its string by writing a new story and it will regurgitate a monotonous stream of hatred but you can't have a conversation with it.
-Dan
Sun Aug 29, 2004 2:05 am Subject: Re: The Music Store revenues
Quotekenaustus wrote:
It's still a huge market and the only serious competitor I see on the horizon is MS. If they come out with their normal software (like SP2) they will have a very hard time converting iPod users.
Microsoft is coming late to the party and the lack of iPod support for the Microsoft music store is a serious competitive disadvantage. The Xbox has been a loser for the Redmond company and the company's other efforts outside of operating systems and productivity products has checkered results.
I don't see Microsoft as the biggest competitor to the iTunes Music Store. I see the slow industry transition to online music sales and the widespread theft of music via of the Internet as the immediate threats to the continued swift growth of iTMS.
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