Demand for iPods boosts Apple shares
By John Stebbins
Bloomberg News Service
Shares of Apple Computer Inc. rose as much as 7.8 percent after analysts at Merrill Lynch & Co. and UBS AG raised their profit estimates, citing surging holiday demand for iPod digital music players.
Apple will probably sell 4 million iPods this quarter, compared with a previous estimate of 3.5 million, Merrill Lynch analyst Steven Milunovich wrote in a note to clients yesterday. UBS analyst Benjamin Reitzes wrote that the holiday shopping season is showing "solid retail momentum" for Apple.
The shares have been the top performer this year in the Standard & Poor's 500 stock index. New variations on Apple's iPod, including the iPod mini and a photo-storing iPod, are helping fuel demand for the music players that were first released in October 2001.
"This really goes beyond the iPod," Reitzes said in an interview. "Apple products are still leading edge and the iPod will bring people to its Macs (Macintosh computer products)."
Apple shares, which had more than tripled this year, rose $4.06 to $68.61 at 2:33 p.m. New York time in Nasdaq Stock Market composite trading.
"Apple has about 2 percent global market share for computers. It won't take much to make Mac sales go up and make a big impact on the company, which I think the iPod will help make happen," Reitzes said.
The shares will probably rise to $78 in the next 12 months, Milunovich said, up from an estimate of $61. Reitzes raised his 12-month price target to $77 from $66.
The iPod, which accounts for about 82 percent of the market for hard-disk players, is the fastest-growing product made by Cupertino, Calif.-based Apple, known for its Macintosh computers.
"Apple has the products that consumers want," said Steven Lidberg, a Pacific Crest Securities analyst in Portland, Oregon. "We talked to retailers and they said their stock of products is good."
Piper Jaffray Cos. analyst Gene Munster sparked a surge in Apple shares to a four-year high after predicting the stock will climb to $100 within a year.
UBS' Reitzes said in his note to clients today that a weekend survey of stores showed no "meaningful shortages," quelling concerns that Apple wouldn't be able to keep up with demand. Some stores were running low or were out of some iPod minis and some iMac personal computers, Reitzes said.
"iPod accessories are adding to Apple's business. These are high margin and a whole new category for the company," Reitzes said in the interview.
IPods accounted for 23 percent of Apple's $2.36 billion in sales last quarter, up from 12 percent a year earlier.
