Needham’s Wolf: New products and innovative strategies from Apple should keep coming

“We’re downgrading Apple from Buy to Hold because the company’s share price has reached our revised price target of $61,” Needham & Co.’s Charles R. Wolf explains on Barron’s Online. “During the past year, in response to the introduction of breakthrough new iPods and Macs and outstanding financial results, we’ve doubled our price target. Increases in the share price followed closely behind. The risk in our downgrade is that the frenetic pace of innovation at Apple could present new opportunities, which could trigger an upgrade at a price that’s much higher than it is today.”

Wolf writes, “A constant stream of innovative new products led to a twofold increase in our price target in less than a year. In January, Apple introduced the Mac mini, the first-ever competitively priced Mac.”

MacDailyNews Take: “First-ever competitively priced Mac?” Based upon whose idea of “competitively-priced,” exactly? Macs have been “competitively-priced” for years before the Mac mini in our opinion.

Wolf continues, “In June, it announced that it would migrate the Macintosh from IBM processors to Intel processors beginning next year — a move that could accelerate Apple’s share gains in the personal computer market. In September, the company introduced the breakthrough iPod nano and followed it in October with the next generation Classic iPod with video-viewing capabilities.”

Wolf writes, “Apple’s resurgence since it introduced iTunes software for the Windows platform has transformed the company into a tech darling. Cumulative iPod sales reached 28 million in September since its introduction in 2001. Apple is dominating the online music market through the iTunes Music Store, launched in 2003. Competitors have effectively ceded the download market to Apple and are attempting to compete — unsuccessfully so far — with music subscription services.”

“Most importantly, Windows users are buying Macs in increasing numbers. We estimate that in the first three quarters of calendar 2005, over one million of them have purchased a Mac compared to our estimate of 500,000 for the entire calendar year. Clearly, the so-called halo is working. Windows users are also switching because of the growing epidemic of viruses infecting their PCs,” Wolf writes. “A frequently overlooked metric has been the performance of the Apple Stores. Visitors to the 124 Apple Stores opened at the end of fiscal 2005 topped 50 million. Weekly visitors per store were up 46% in fiscal 2005, while same-store sales grew 45%. Reflecting the accelerating migration of Windows users to the Mac platform, Macintosh sales in the stores registered a 45% sequential increase in September.

Wold writes, “Our valuation analysis indicates that the current price captures the opportunities that are visible today. New products and innovative strategies from Apple should keep coming. However, we can’t quantify them in our valuation model since we don’t know what they are. The risks in our downgrade stem from what we don’t know as well as the possibility that Windows users are migrating to the Mac platform at a far higher rate than we’ve modeled.”

Full article here.

Advertisements: The New iMac G5 – Built-in iSight camera and remote control with Front Row media experience. From $1299. Free shipping.
The New iPod with Video.  The ultimate music + video experience on the go.  From $299.  Free shipping.

Related articles:
Windows PC retailers face tough holiday season, meanwhile Apple stores are packed as Mac sales surge – November 09, 2005
Analyst estimates over a million Windows to Mac switchers during 2005’s first three quarters – November 07, 2005
Windows sufferers: It’s not your fault, but it is your problem – switch to Mac – November 07, 2005
Tech writer: Windows PCs highly vulnerable to zombie hijacking; get an Apple Mac instead – November 06, 2005
Windows switchers, now’s your chance: Apple Mac mini with Mac OS X Tiger for $379 – November 03, 2005
Computer columnist: anti-virus software purely optional for Apple Macs, not so for Windows – November 01, 2005

Microsoft apologists and why Apple’s Mac OS X has zero viruses – October 24, 2005
$500 bounty offered for proof of first Apple Mac OS X virus – September 27, 2005
Symantec: 10,866 new Microsoft Windows virus and worm variants in first half 2005 – September 19, 2005
Hackers already targeting viruses for Microsoft’s Windows Vista – August 04, 2005
16-percent of computer users are unaffected by viruses, malware because they use Apple Macs – June 15, 2005
ZDNet: How many Mac OS X users affected by the last 100 viruses? None, zero, not one, not ever – August 18, 2005
Intel CEO Otellini: If you want security now, buy a Macintosh instead of a Wintel PC – May 25, 2005
97,467 Microsoft Windows viruses vs. zero for Apple Mac’s OS X – April 05, 2005
Millions of Windows PC’s hijacked by hackers, turned into zombies; Macintosh unaffected – September 08, 2004
Defending Windows over Mac a sign of mental illness – December 21, 2003


  1. “We’re downgrading Apple from Buy to Hold because the company’s share price has reached our revised price target of $61.”

    Wow, that makes way too much sense for an analyst. Usually they would ust move the price target or, as some have done, they say buy, but have a price target less than the current price. This was actually a decent article explaining their reasoning.

  2. ron, how is that FUD? You understand that FUD means “Fear, Uncertainty, Doubt” right, generally used as a means to stop someone buying a competitors product due by giving misleading information, or suggesting that something bad will happen if you did?

    What that guy said may be inaccurate, but its not FUD.

  3. “Apple’s resurgence since it introduced iTunes software for the Windows platform has transformed the company into a tech darling …”

    Speaking of transformations and stuff; the iTMS Spain is starting to display in Spanish and iTMS Italy is now using Italian. Those are somewhat new accomodations, I think. Nice.

    German, French, English, Japanese, Spanish, Italian … mmm hmmm. Lookin’ good, iTunes!

  4. Hey, I used to be a mac user and loved them but stopped buying them because they weren’t “competitively priced”. Oddly enough, I was able to get everything on a PC and I didn’t notice any decrease in productivity. Wow eh! How could that be? Impossible you all scream!! It’s a complete mystery and this despite viruses, etc, etc. Now I might actually consider switching back and there might be some advantages but I’m still playing with an older imac running osx and haven’t seen anything that makes me want to come back into the fold and beg for forgiveness for deviating from the “approved path” of enlightenment. I admit I probably need to force myself to use it until I become comfortable before making a true comparison…but at least I can admit that. OSX with the ability run windows on a dual boot system sounds interesting though. Either way, most of you guys still make Jerry Falwell look like a pussy cat.
    This is what the Catholic Church used to looked like in Galileo’s day. Dogmatic, closed minded, anti-everything. May as well get down and pray to your Macs but that would be idolatry.

Reader Feedback

This site uses Akismet to reduce spam. Learn how your comment data is processed.