TMO Reports - Analyst: Apple to Gain Mac Market Share

by , 6:55 PM EST, March 16th, 2005

The iPod Halo Effect, security problems with Windows, and Apple's ability to use innovation to bring down pricing will lead to the company growing Mac market share over the next two to three years, according to a Wall Street analyst. In a research note obtained by The Mac Observer, Gene Munster of Piper Jaffray told clients that even a minimal gain in market share could have a "significant impact" on the company's earnings per share (EPS).

Noting first the iPod Halo Effect, the idea that people who buy iPods will look more closely at buying a Mac, Mr. Munster again stressed that Apple will gain converts to the Mac platform over time.

"Recently, Street focus has been on quarterly iPod unit numbers," wrote Mr. Jaffray. "While clearly Apple's domination in digital music is a critical piece to the story, we do not believe that iPod is the only potential growth avenue for the company."

Were Apple to grow it's share of the computer market by as little as 1%, said Mr. Jaffray, it could add 25% to Apple's EPS.

"Specifically, we believe that if Apple could grow its market share from 2.0% in CY04 to 3.5% in CY06," wrote Mr. Jaffray, "the incremental add to our existing EPS estimate would be $0.30, or 25%."

More importantly, growth of this nature has not been included in Piper Jaffray's financial models for Apple, on which the firm's Outperform rating and target price of US$52 per share is based. Mr. Munster has instead modeled for a growth in market of .3%, to 2.3% of the market, a number he called conservative in Wednesday's research note.

Mr. Munster reiterated his $52 price target and Outperform rating for Apple's stock, which means he expects it to outperform the markets.

Apple's stock closed higher in Wednesday's trading at $41.18, a gain of 0.22 (+0.54%), on moderate volume of 25 million shares trading hands.

*In the interest of full disclosure, the author holds a small share in APPL stock that was not an influence in the creation of this article.  

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