“Rest easy, ye merry investors in Apple Computer. Even after a three-year run that has sent Apple shares heavenward, some bulls believe the company — and its stock — can only climb higher in 2006,” Troy Wolverton reports for TheStreet.com. “Apple shares have more than doubled in price this year and have risen more than 10 times since their nadir back in 2002.
“So, what’s the next product splash to spark the stock’s run to $100? Depending on whom you ask, the answer is anything from an Apple-branded cell phone to an Apple-flavored take on Microsoft’s Media Center PC concept to simply more iterations on the iPod line,” Wolverton reports. “A step into consumers’ living rooms would seem to be a natural one for Apple, given its dominance of the digital music market, its introduction of downloadable video content and the multimedia features of its computers. The company already made a move in that direction earlier this year, introducing a program called Front Row that allows new iMac users to remotely control the songs or videos playing on their computers. The bet among analysts is that Apple will expand on that plan in 2006, coming out with a device that better links consumers’ existing entertainment systems with their digital content. That’s been the ambition of the Media Center PCs, but those have seen tepid sales to date.”
“For bulls, the move portends good things for Apple in the PC market. Consumers are increasingly looking to buy laptops instead of desktop computers. While Apple’s laptops have long been praised for their design, they increasingly have been seen as underpowered, thanks to the long delay by Apple’s PowerPC suppliers in developing a low-powered version of the high-end G5 processor,” Wolverton reports. “Once Apple makes the switch to Intel, the company’s laptops no longer should be at a speed disadvantage to competitors, analysts note. Intel has a robust line of notebook chips, which are the industry’s standard… Despite the obstacles on the notebook side, Apple’s worldwide share of the PC market has risen from roughly 2% in 2004 to about 2.4% through the first three quarters of 2005. Some bulls think that market share will rise to as much as 10% in coming years, thanks not only to the Intel chips, but by using the iPod to attract new Macintosh customers — the so-called halo effect. ‘The halo effect is definitely here,’ says a portfolio manager at a major financial services firm who is long Apple.”
“But beyond new products, fans of Apple’s stock make the case that the company can continue to outperform the market by simply doing what it has been doing. IDC projects that the worldwide market for digital music players will grow to 106 million units next year. Meanwhile, Apple estimates that it has about 75% of the U.S. market for digital music devices,” Wolverton reports. “Assuming that it can maintain that dominance and extend it worldwide next year, Apple would sell 75 million to 80 million iPods next year… Pip Coburn, CEO of Coburn Ventures, believes that people are overlooking the growth of Apple’s retail store base. The company now has some 130 stores, up from just 65 at the end of fiscal 2003… Given that Best Buy, for instance, has more than 700 stores and Gateway had hundreds of retail outlets at its peak, Coburn believes Apple can easily hit 300 stores over the next three years, helping ratchet up sales and earnings… Jim Grossman, a portfolio manager at Thrivent who is long Apple, feel that with this company — and stock — you’ve just got to believe. ‘At times, you’ve got to abandon traditional financial metrics and, for lack of better terms, drink the Kool-Aid,’ he says.”
Full article with much more – a good read – here.
Apple has plenty of room for massive growth in the personal computer and CE markets. You almost don’t have to just believe or drink the Kool-Aid. You just have to look at the pieces Apple has in place on the board today and think about the chances of competitors outdoing the iPod or Mac OS X in 2006.
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