Analyst still down on Apple, and why the iPod market might not be saturated

Fri, Jan 23, 2009

Analysis, Finance, News

Apple announced stellar earnings this week, but one analyst remained unimpressed.

Last week, RBC analyst Mike Abramsky downgraded Apple to an “Underperform” rating and lowered his price target for the stock down to $70.  Surprisingly, though, Abramsky’s view of Apple didn’t change much, if at all, following Apple’s earnings conference call earlier this week.

Abramsky remained cautious and pessimistic on the stock, noting that Apple desktop sales had declined nearly 25% from the same quarter a year ago. Laptop sales, however, increased by nearly 35% from the same quarter a year ago. With that in mind, does it matter if desktop sales are slowing if laptop sales are picking up the slack, and then some? If the objective, from an analysts perspective, is to make money and be profitable, shouldn’t the breakdown of where that money comes from be secondary to the fact that profits are at an all-time high?

Abramsky also cautioned that Apple is bound to experience a ‘downshift’ in growth as iPhone sales begin to decelerate and iPods begin to saturate the market. While iPod saturation is a concern, it’s important to remember that analysts have been warning of iPod saturation for almost 4 years now, yet Apple continuously finds ways to introduce new and attractive iPod models that continue to drive incredible and consistent growth. I mean, the iPod has been around since 2002, and everyone and their mom owned one by 2005. It’s now 2009 and Apple just reported that it recently sold the largest number of iPods in a quarter in its history, not to mention the fact that every iPhone also doubles as an iPod. And with the rise in downloadable media, and inreasing popularity of the iTunes App Store, a strong case could be made that iPod sales will continue to grow in the future.

Abramsky also noted, bizzarely, that Apple stands to benefit strategically and financially should it introduce a new lower cost iPhone model, and stated that there’s a strong chance of Apple releasing such a phone in 2009. Call me crazy, but doesn’t Abramsky’s job description include listening to Apple’s earnings conference call? I mean, if he had, he might have heard Apple COO (and day-to-day CEO) Tim Cook explicitly state that Apple would not be producing a low end voice phone.

While the current economy and slower retail store sales are legitimate causes for concern among investors, one would think that Apple’s last quarter shows that it is better positioned than any other company in the industry to sustain, and even increase, profitiability.


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2 Comments For This Post

  1. keaura Says:

    Clearly Mr. Abramsky needs to find new employment. Or else RBC is happy having someone without a clue on its payroll.

  2. Constable Odo Says:

    Last year the analysts had already sworn that the iPod market was dead and that everybody that ever wanted one already had one. Yet for some strange reason iPods sold like hotcakes for the holiday season. So the analysts made a mistake. They meant the first quarter in 2009 was when people would stop buying iPods and the iPod market is as good as dead. Why is it that everyone is going to stop buying Apple products and start buying some other products? I still know people that say they want to buy an iPod. My question is if consumers are going to stop buying Apple products, who’s products will they be buying? Sony, Dell, Acer, Nokia. Is Acer the next Apple?

    I didn’t hear anyone yelling that Zune sales were down ahead of earnings. Not even a whisper saying Microsoft shares was heading for the toilet.

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