Apple Computeris second quarter earnings drew concern from Prudential Equity Group analyst Steve Fortuna. Apple reported revenues at US$4.36 billion, which was about 5 percent lower than Mr. Fortunais estimates. He commented "For the first time in 12 quarters, managementis revenue guidance became reality. In a momentum driven stock like AAPL, a hiccup to growth cannot be taken lightly."
iPod sales were generally expected to be around 9 to 10 million units, but they came in at 8.5 million, below Prudentialis estimate of 8.8 million. Part of Mr. Fortunais concern is based on Apple deriving about half of its revenue and about 88 percent of the companyis growth from iPod and music sales.
Mac sales, however, were in line with expectations, but he sees the transition to Intel processors as a potential risk. Mr. Fortuna also suggests that the Intel-based version of the iBook may be delayed, further exposing Appleis value.
Mr. Fortuna is predicting that Appleis momentum will drop off, and that revenues will follow as consumers spend less on disposable income items, and other electronic devices fight for dollars that would otherwise be spent on iPods. He also expects that Apple doesnit have any more products to release that will be as successful as the iPod, and that Sony is likely to challenge Appleis dominance in the music market.
Prudential is lowering its fiscal year 2006 revenue estimate by $935 million to $19 billion. Fiscal 2007 projections are lower, too, at $22.1 billion - a full $1.5 billion lower than before. 2006 EPS has been reduced $0.05 to $2.05, and 2007 is $0.13 lower at $2.50. It also set Appleis target price at $80.
Apple stock is currently trading at $67.90, up 2.25 (3.43%).