News broke last week that Microsoft (MSFT) won’t have a fresh operating system or a fresh update to Office for the Christmas selling season. On the other hand, all indications are that the new consumer laptops from Apple (AAPL) are selling above initial analyst estimates (which were probably conservative).
APPL shares are trading near their 2006 low. The stock’s weakness has been mainly related to fears about iPod sales. While I would prefer to see stronger iPod sales, I stand by my bullish thesis built on accelerating Mac sales. One million iPods are worth $200 million in revenue to Apple. With an ASP of $1300, or over six times an iPod, it takes only an incremental 150,000 Mac sales above expectations to make up any revenue shortfall from iPods. And Macs have higher margins.
I’ve been wrong on Apple this year but I think the setup is good heading into the company’s seasonal strong period driven by back-to-school and holiday sales. Most analysts have reduced iPod shipment and earnings estiamtes. The expectations bar has been lowered so that a decent earnings report and in line guidance should support the shares. Positive news about better than expected Mac sales and/or a refresh of the iPod line could boost the shares.
I am sticking with AAPL but expect lots of volatility surrounding the company’s June quarter earnngs report.