Piper Jaffray: Look at Apple's Product Roadmap, Not Q2 Outlook

Piper Jaffray analyst Gene Munster on Thursday issued a research report in response to Appleis conservative US$4.3 billion revenue guidance for the current quarter. That number, which is below the Wall Street consensus estimate of $4.672 billion, caused the companyis stock to pull back on Wednesday and Thursday, but Mr. Munster believes that investors should look instead to Appleis product roadmap and competitive position.

"The March quarter will likely benefit from pent-up demand around the new Intel-based MacBook Pro, which should more than offset the impact of customers waiting for Intel-based PowerMac and iBooks," he wrote. Mr. Munster noted that his research showed that the slowdown in Mac sales during December because of the Intel switchover "was a reality, but muted."

The analyst also expects 2006 to be a more robust product year than 2005, not only in terms of new and updates iPods but also for Macs. "The incorporation of Intel and potential introduction of new form factors is leading to the launch of several new/updated Macs in 2006," Mr. Munster wrote. "Expect many more changes to the Mac lineup than were seen in 2005."

The analystis estimate for Appleis March revenue is 8% higher than guidance, which he based on the fact that the company has exceeded its guidance by an average of 12% the past three quarters. In fact, its original guidance for the December quarter was $1 billion less than the revenue reported by CEO Steve Jobs during his Macworld keynote. Apple rarely, if ever, issues revised guidance during a quarter.

Mr. Munster also stated confidence in his $103 12-month target price for Appleis stock, adding: "There has been growing chatter that Apple is becoming a new representation of an iInternet bubble stock.i We believe this label is unfair." He noted three reasons why he thinks the companyis shares will hit that price by the end of the year: significant earnings growth; continued iPod and Mac market share growth; and expansion into new product categories ("ex.: mobile phones, other CE entertainment devices") by late in the year.

The analyst also retained his "Outperform" rating on the stock. At 11:50 AM EST on Thursday, it was selling for $79.26, down 3.92% for the day. While the companyis shares surged last week after Mr. Jobsi announcement of better-than-expected revenue and iPod numbers for the December quarter, they dipped on yesterday and then plunged in after-hours trading, when Apple revealed its March quarter outlook during its conference call with analysts.

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