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First on TMO - CSFB: Apple Stock Heads to $70; iMac Market Share to Grow

by , 9:40 AM EST, December 21st, 2004

Credit Suisse First Boston analyst Rob Semple raised the target price for Apple Computer (AAPL) Tuesday to US$70, saying sales of its iPod digital media device and the G5 iMac will propel company earnings to new heights.

"Apple is poised to significantly exceed its initial December quarter outlook issued on its fiscal fourth-quarter conference call in October," Mr. Semple wrote in his one page commentary obtained by The Mac Observer. "We estimate Apple's fiscal (fourth-quarter) results will reach $3.3 billion in sales and $0.55 in earnings per share, versus its initial guidance of $2.8-2.9 billion and $0.39-0.42 (respectively)."

Mr. Semple predicted Apple will ship 4.8 million iPods in its fiscal first quarter and will end up with "a substantial backlog, mostly in international locales." He said he believed many predictions of iPod sales had been "overly aggressive" and that a shortage of 1.8-inch hard drives manufactured by Toshiba is to blame. He said he believed hard drive shortages would be a thing of the past by March of 2005.

Mr. Semple believes Apple will gain PC market share this quarter, but is unconvinced Apple can sustain the growth.

"We believe unit shipments will increase 21% year-to-year versus market growth of 9 to 10%. The strength is being driven mostly by the iMac, which faces an easy year-to-year compare and is launching during the year's strongest period of consumer demand," he wrote. "Gaining share in PCs is key to Apple's long-term success, as holding share in a market with long-term revenue growth of 1% to 2% will be a drag on the overall business."

We are maintaining our Neutral rating owing to valuation concerns, but we do recognize that the apparent vindication of the "halo effect" will continue to drive strength in the stock during the seasonally strongest period of the year."

The so-called 'halo effect' is when Macintosh sales improve as a result of iPod sales. There is no direct evidence that such a condition exists and Apple has given evidence to back its claim. One factor that refutes the 'halo effect' is the fact that the percentage of Apple retail store visitors purchasing a Mac has remained flat for the last nine quarters.

Apple shares opened Tuesday at $63.56.

Observer Comments

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Close Name:Mace Posts: 9163 Joined: 07 Aug 2003
Tue Dec 21, 2004 1:36 pm Subject:
Close Name:gear_media Posts: 9 Joined: 14 Dec 2004
Tue Dec 21, 2004 5:43 pm Subject:

Quote
Mace wrote:

What exactly is the point of a comment like this?


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View Name:Guest
Tue Dec 21, 2004 9:03 pm Subject: Fallacious logic
Close Name:Mace Posts: 9163 Joined: 07 Aug 2003
Wed Dec 22, 2004 12:21 am Subject:

Total unit sale of Macs in Q4, 04 = 836k

Unit sale of Macs in Q1, 05 will be more due to the release of iMac G5 + filling of channel inventory. If no halo effect, how many would this figure be? Anything more is due to halo effect.

Based on past data, I estimate the figure to be about 230k to 240k. That is, total unit sale in Q1, 05 should be around 1,070k. Anything more is due to halo effect. Let's wait for Jan 05 result announcement.

Btw, from past data, Christmas does not brought about more unit sales.


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View Name:Guest
Wed Dec 22, 2004 1:34 am Subject: the apple logo
Close Name:wmduncan Posts: 17 Joined: 22 Sep 2004
Wed Dec 22, 2004 9:49 am Subject: hop aboard the train before it runs you down

CSFB typically has been very bearish on Apple. Their tech analysts have never liked Apple and their ratings bear this out. I don't know why - perhaps they're in Microsoft's pocket, or their analysts are simply so biased as to be unable to separate facts from fiction.

This upgrade is simply a matter of the analyst, seeing that they'll be the laughing stock of their industry if they persist in their unreal reports, hoping aboard the train that every other firm is on. I'm not going to comment as to whether the kool-aid they're all drinking is not laced with something. CSFB is just out on the fringe away from reality.

Consider, after MacWorld and the traditional January bounce compounded by the January SEC report, that Apple is trading in the 70's and CSFB's forecast still says "expect 40's". They would look really dumb! They had to upgrade Apple.

All this should say to investors is that if you want competent tech stock analysis, CFSB is not the place to look.


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