Analyst: Macs Should Offset Lower iPod Sales

June 20th, 2006 at 3:00 PM - Apple Stock Watch by Jeff Gamet

UBS Investment Research analyst, Ben Reitzes, expects iPod sales may be lower for the third quarter of 2006, but rising Mac sales should make up the difference. iPod sales should start to climb through the end of the year, and Mac sales are expected to accelerate into 2007. Mr. Reitzes stated "We believe acceptance of new products in terms of Macs and iPods is the key for Appleis shares this year."

Solid educational buying and strong interest in the new consumer-oriented MacBook has Mr. Reitzes raising his estimate for Macs sold in the third quarter from 1.24 million units to 1.32 million. He is also raising his total sales estimate for 2006 from 5 million units to 5.1 million.

Mr. Reitzes agrees with other analysts that the Intel-based replacement for the Power Mac G5 will be introduced in August. Thatis most likely to happen at Appleis World Wide Developer Conference along with the preview of Mac OS X 10.5 (Leopard).

Despite the continued interest in the iPod, sales are down slightly. USB is revising its iPod unit sales to 7.8 million for the third quarter, down from 8.4 million. Total iPod sales for the year are projected at 39.8 million units instead of 40.9 million. New iPod models should help boost sales moving into 2007.

Mr. Reitzes expects Apple to report third quarter revenues of US$4.35 billion with an EPS at $0.42. Total revenue for 2006 should be $19.3 billion with and EPS of $2.03. He is setting his fiscal 2007 revenue estimate at $24 billion and $2.60 EPS.

UBS is maintaining its "Buy" rating for Apple with a target price of $90.

Apple is currently trading at $57.56, up 0.09 (0.16%).

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