Although generally pleased with Appleis 2005 performance, Merrill Lynch is remaining cautiously optimistic about iPod growth. iPod sales were below the firmis expectations, but Mac sales outperformed analyst models.
A major concern for Merrill Lynch is the limited supply of iPod components, which is constraining the number of units Apple can produce and ship. As long as the dip in sales is a parts supply problem, and not related to lower demand, the iPod should continue to take market share. The firm estimates that the iPod has penetrated about 15 percent of the consumer market right now, and that may climb as high as 35 percent by 2007.
Merrill Lynch has rated Appleis stock as Neutral. Currently, Apple stock is trading at US$49.50, down 2.09 (4.05%).