Analyst: iTunes Store Concerns Overdone

Concerns over reports that iTunes Store sales are "overdone," and the misplaced fears offer an opportunity for investors, according to American Technology Research analyst Shaw Wu. Instead of declining sales, he claims, iTunes purchases may be on the rise.

"Our analysis of Appleis iTunes downloads shows strong growth through 2005 and 2006," he said. "Specifically, we estimate that music downloads in January 2005 were averaging about 1.28 million per day, up from 150,000 per day in December 2003. Now, from the latest data in September for 2006, we estimate that music downloads are around 2.5 million per day. That translates to up 95% Year over year."

Mr. Wu also feels that tracking iTunes Store sales may not even matter as an indicator for predicting iPod sales.

Apple has shown a big run-up, but Mr. Wu sees more room for growth leading up to Macworld Expo 2007 in January. Post Macworld, the release of Mac OS X 10.5, the launch of the iTV, new iPods, the iPhone, and additional movie studios at the iTunes Store are all expected to keep Appleis momentum up throughout the rest of the year.

ATR is maintaining its above consensus estimates for Appleis December quarter, and is predicting US$6.4 billion in revenue and $0.79 EPS, along with 15.5 million iPods sold. Mr. Wu is maintaining his "Buy" rating and $99 target price.

Apple stock is currently trading at $89.59, up 0.51 (0.57%).

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