BusinessWeek: Investors seem to be missing Apple’s upside

“Steve Jobs has been on a roll. His iPod music player is the hottest product in the consumer-electronics market, selling a jaw-dropping 733,000 players in its first fiscal quarter, ended December 27, 2003. Apple’s new deal with Hewlett-Packard to sell HP-branded iPods and put the iTunes Music Store on the default desktop of all HP consumer machines was a major coup …And on Jan. 14, Apple posted its strongest quarter in two years. Revenues hit a four-year high of $2 billion, 36% above the same quarter in 2003. Apple shipped 829,000 computers, a 12% increase from the same quarter last year,” Alex Salkever writes for BusinessWeek.

“So why was Wall Street only lukewarm after this seemingly strong performance? Apple shares fell 5.6% the day after the earnings report, from $24.20 on Jan. 14 to $22.85 on Jan. 15 (and closed on Jan. 23 at $22.56). True, the stock had run up in anticipation of solid numbers. But the rapid retreat surprised many, even though the logic behind the move is clear: The Street had been hoping for bigger sales numbers on PowerMac G5 desktops,” Salkever writes.

Salkever writes, “The Street’s short-term logic is easy to understand. But investors with a longer-term horizon might want to look closer at Apple. For starters, worries about sluggish sales on the PowerMac line aren’t justified. The main buyers of these hihg-end machines are creative professionals in advertising and media. While that sector is looking stronger by the month, it’s still far from the salad days of the dot-com boom when buying a new computer hardly required any thought. The real return to strength in the ad and media biz will come in 2004, and that’s when Apple should start seeing stronger sales of these machines. Further, Apple is developing a strong niche in the scientific computing market as more Unix jocks at institutions of higher learning decide to combine their workstation and their PC into one box.”

“All told… the Street might be missing the forest for the trees in Apple’s latest numbers, and lots of green could shake loose if Jobs & Co. realize even a little bit of the upside that investors seem to have overlooked in the earnings report,” Salkever writes.

Full article here.

8 Comments

  1. If Apple had been in an IPO situation in 1998 or so with iTunes and iTMS as its products , then it would have had a market cap well in excess of its current value for the entire company.

    As far as PowerMac G5 sales go, I imagine that many adopters are waiting for Rev 1 with faster clock speeds and the new 90nm CPU technology. Not only do you bypass any growing pains associated with an initial product release, but you give the software vendors a chance to tailor/optimize their products for the new hardware.

  2. I for one have believed in this company since before 1984 and so do most people that own a Mac,

    Before the first imac, I started buying 16 shares of AAPL a month for sometime as low a $13 a share: and has split since I started buying it.
    Apple keeps the stock at a lower price to keep small investors like me buying, so if it reaches the $50 per share mark it will probably split again.

    So here is some small advice, if you all think its cheap, open a trading account and just buy a couple shares a month if you can afford it.
    It a little over 5 years I have over 1,600 shares and they are worth a lot more than I paid for most of them.

    You don’t make money on stocks that someone in business world tells, you should buy, because by the time you read about it, its to late to get a good deal and Apple stock is a good deal.
    right now it might not be the ground floor but you can sure get in while the price is right.

    And when the rest of the world wakes, up you will have bought it when the price was a steal.

  3. Speaking as the Creative Director of our Design Studio I feel there is a more transitional stage going on now with Apples hardware, but its a slow one. I know of many designers who are still using OS9 and making do with their current equipment, mainly for financial reasons. Over the past 12 months or so the creative industry has experienced pretty turbulent times. That along with the changeover to OSX hasn’t been an easy one for agencies and pre press houses that have moved forward to OSX, especially where things such as fonts and 3rd party utilities are concerned. This has unfortunately put any hopes of buying new iron lower down the list of importance.
    We, like many agencies are certainly looking forward to upgrading our hardware soon, and Panther has proven to have remedied many issues that plagued Jaguar, such as speed. We are already finding things are picking up and our clients are starting to spend again. These so called ‘analysts’ that have critiqued Apple because of lower than expected Power Mac sales need to go back to school and understand basic economics.

  4. Definitely the case Guitarman. The print shops we use have all been in pinch since 9-11. They aren’t interested in upgrading their prepress equipment becuase things work in OS 9, and they aren’t sure they can upgrade to OS X and QXP 6 without completely frying their entire plate/film making system (which means lots of capital and downtime to get things working right). So then the question becomes, if we have the fastest machines that work with what we have why buy new ones and spend all that money?

  5. But that’s what analysts don’t understand..Apple is more of a design tool than what they understand to be a “computer.” When dell meets expectation for thier quarter, or year, or sends out a prediction for next quarter,they’re depending on new people that want to buy a 4oo computer to “just do email, and play a few games.” As funny as it sounds “computer” is not the same as “computer”, but analysts (have they ever been right) think in the simplest of terms

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