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$100 for bite of Apple? Stock ripe to double, analyst says

By Chris Johnson
Bloomberg News

PRNEWS Apple Mac specialist Brandon Mabanag loads a cart of iPods at the Apple Store in San Francisco. Apple is preparing for the day after Thanksgiving, historically the largest shopping day of the year.

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Apple Computer shares surged to a four-year high yesterday after a Piper Jaffray analyst said the stock may almost double to $100 within a year, citing a survey that shows the iPod digital music player is boosting sales of other Apple products.

In a Piper Jaffray survey of 200 U.S. iPod users, 13 percent who formerly used other brands of personal computers said they had already purchased a Macintosh or planned to within a year, Minneapolis-based analyst Gene Munster wrote in a note to clients yesterday.

He said Oct. 14 the shares might reach $52 within a year. They surpassed that price two weeks later.

iPod shipments jumped almost fivefold in the quarter ended Sept. 25 to 2.02 million, helping Apple more than double profit to $106 million. Apple has sold 5.74 million players since October 2001. Of the 200 iPod users surveyed, 199 said they were satisfied with the product, said Munster, who does not own Apple stock.

"People love them," Munster said. "They go into Apple stores and talk to their friends about Apple. That's going to create a 'halo' effect for their core business."

Shares of Apple rose $6.18, or 11 percent, to $61.35 yesterday. The shares have nearly tripled this year.

Of the 21 analysts who follow Apple, 13 have "buy" ratings on the shares, eight have "hold" ratings and none recommend selling the shares. Prior to today, none had price targets higher than $61.

Munster, who rates the shares "outperform," raised his estimate for fiscal 2005 sales to $11.5 billion from $10.4 billion and lifted his 2005 profit estimate to $1.52 a share from $1.29. Nearly one of three Apple resellers Piper Jaffray surveyed said the quarter is "tracking above expectations."

The iPod music players, Apple's fastest-growing product, accounted for 23 percent of Apple's sales in the quarter ended in September, compared with 7 percent a year earlier. iPod sales rose to $537 million from $121 million.

Apple's sales of Macintosh computers increased to $1.23 billion from $1.2 billion a year ago.
 
Despite the iPod phenomenon, Apple's recent upbeat earnings and an increase in iMac sales, worldwide market share fell to 1.8 percent from 2.1 percent worldwide in the third quarter, according to market research firm Gartner. In the same period, Apple's U.S. market share dropped to 3.2 percent from 3.6 percent.

Munster said his $100 price is 37 times his estimate of fiscal 2006 earnings of $2.17 a share, plus the company's cash per share. The $52 price was based on 29 times his estimate of 2005 earnings of $1.29, plus cash on hand.

"Demand is picking up, which means the numbers could prove to be conservative," Munster said. "There could be over the next several years 50 million or 100 million iPods in the market."

Apple has 92 percent of sales of hard-disk-drive music players, New York-based analyst Darcy Travlos of Caris wrote in a note to clients yesterday. Apple's iPod sales in the October-December quarter should exceed the 3.6 million sold in the prior nine months, she said in an interview.

That should spur sales of the latest version of the iMac, an all-in-one design in which the computer is contained behind the monitor, she said. It was released in mid-September.

"I think this is just the beginning of a ramp for Apple," said Travlos, who rates the shares "buy" and doesn't own them. "What we're going to see is continued demand and acceptance for iPod, and it is slowly going to creep over into the iMac market."