Thursday, March 20, 2008

Apple (AAPL) Mac sales up 60% in February

I haven't talked about Apple (AAPL) in a while. When last we left Apple, hand wringing over iPod sales this or iPhones sales that, led to a tremendous selloff. I was commenting how everyone is missing the forest for the trees - the real story of these products is the halo effect of bringing customers to the bread and butter of the company: the Mac. But then again I was shouting into a stiff wind and the herd ran me over. They had no use for that logic. But I still like this company as the de facto consumer entertainment convergence play; although I needed to sell some today to layer into the demolished commodity space.

Why still like Apple when the consumer is dying is one of my themes? Well, not every consumer - especially the "snobbish" Apple consumer ;) The upper 10-15% will still be fine... and for the other % of society? Well the last things people will give up are video games (see Gamestop's latest results), fashionable gadgets, and $200 jeans for teenagers. It would take a full out depression for teenagers to stop buying those jeans - I still contend American parents would rather give their kids money for expensive clothes than buy something for themselves - so they will cut that last. As customers retrench, spending on restaurants goes down but things that help us cocoon or still have brand 'cache' will hold up the best. And Apple is increasingly turning into an international story.... So it's not all blight out there - even from this corner of the blogosphere. Macs seem to be booming...
  • The report shows growth in Mac unit sales up 60 percent from 2007 and growth in dollar terms up 66 percent. That’s considerably higher than Pacific Crest’s estimate of 10 percent, according to the same report.
  • AppleInsider’s chart of the NPD data is pasted below the fold. It shows Apple’s share of the U.S. PC market growing from 9 percent in Feb. 2007 to 14 percent in Feb. 2008. In dollar terms, NPD has Apple capturing a full 25 percent of the U.S. computer market last month.
  • Meanwhile, Piper Jaffray’s Gene Munster analyzed NPD’s February report on the iPod line and projected sales between 9.7 and 10.5 million units for the March quarter. The midpoint of those two figures would equal a 4 percent drop from 2007, considerably lower than the 2 percent gain on 10.8 million units that is the Street’s consensus.
Frankly, a 14% market share (if accurate) would blow away all my assumptions - I was hoping for something like that by end of 2009. (in dollar term, 25% is even more impressive) But again, people seem fixated on these periphery products - like the Walkman for Sony which created a buzz and cache (in the 80s folks, I know Sony is not cool now), iPod revolutionized Apple BUT to focus on iPod now as a growth driver is misguided. It will be a nice steady cash cow and keep driving people to another cash cow, the iTunes website. Meanwhile, the growth in the Macs is extraordinary if these numbers hold. And again, this is without the enterprise market which is the last castle for Apple to storm. Some of the recent updates to the iPhone are designed to help Trojan Horse into the enterprise.... if that conversion from PCs to Apples ever takes hold, it's going to be a massive upside.

But I've been saying that for a long time, I said it in good times (for the stock), I say it in bad times (for the stock) - the story remains the same, but in the near term the herd has it's own ideas and drives the stock where it wants to go (namely into purgatory of late). I still think Apple is one of the few true growth stories in tech, and at current valuation is extremely compelling. But until a lot of technical resistance overhead in the low to mid $140s is taken care of, the stock will remain range bound. But... I think this will be a very good performer in 2nd half 2008, all things being relative (i.e. stock market not imploding another 20%).

Long Apple in fund; no personal position

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