Analyst: iPod Sales Down Year-Over-Year, Buy AAPL on Dip

May 13th, 2009 at 1:27 PM - Apple Stock Watch by Bryan Chaffin

Barclay's Capital analyst Ben Reitzes advised clients on Wednesday to buy shares in AAPL on the dip. In a research note obtained by The Mac Observer, Mr. Reitzes told clients that a negative investor reaction on Tuesday to concerns about iPod sales was "overblown," and he maintained his "Overweight" rating on the stock and a target price of US$155 per share.

An Overweight rating from Barclay's means, "The stock is expected to outperform the unweighted expected total return of the sector coverage universe over a 12-month investment horizon."

Mr. Reitzes wrote that he expects Apple to reposition the Mac product to keep to stay in line with the declining prices in the market, and repeated his belief that the company will release some sort of tablet device in the Fall of this year. He also said he was "excited" about the possibility of the iPod touch getting a camera, which he also thinks will take place later this year.

"In short, he wrote, "we believe all these new products along with an improving U.S. economy can help Apple's earnings accelerate into next year."

iPods weak

Citing weekly data (i.e. not final data) from NPD, Mr. Reitzes said that iPod sales are down 16% year-over-year for the June quarter so far. While bad in terms of lower revenue, the market as a whole is down some 21% year-over-year, meaning that Apple is beating the market and gaining share.

The stock market reacted negatively to this on Tuesday, sending shares of AAPL down $5.26. Mr. Reitzes told clients that such a reaction was "overblown" in a section of his note titled "Buy on Dip."

He wrote, "While we believe some order cuts occurred due to product shipment timing (late June for the new iPhone) and a pushed out launch in China, we believe the reaction is overblown. We still believe that the greater amount of sales of new product and repositioned lower-end product should occur in the September quarter, resulting in very strong free cash flow."

In the March quarter, Apple managed to post small year-over-year gains. Barring a catalyst for increased sales, the company looks unlikely to repeat that this quarter, judging by the weekly NPD numbers.

Today

Apple continued to lose territory in early afternoon trading Wednesday, with the stock trading at $120.58 per share, down $3.84 (-3.09%), on moderately strong volume.

The broader markets also lost ground, with each of the three major indexes in the negative.

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