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Thursday, April 06, 2006 10:43:03 PM
Projected PC industry unit shipments for calendar 2006 is roughly 230 million units. So 1% of share is 2.3 million units. Or ballpark of 600k units a quarter.
Apple's AUP is $1,400/unit. That's Rev. of $840mm. "Peripherals & Other Hardware" has been running 18% of PC Revenue and "Software & Other" has been running 17%. So those CPU sales would generate roughly another 35% in Revenue from Peripherals, Software, Service contracts, .Mac and other goodies. That's add'l Rev. of $295mm. Total = $1.135 Billion in Rev. per quarter.
Although operating margins are running at roughly 12%, operating expenses rise at less than half the rate as operating income on each marginal additional dollar of Revenue. Long and short, that $1.135 Billion in additional Rev. should produce roughly $205mm in operating (pre-tax) income => $140mm in Net Income. On the current 875 million share count, that's $0.16/shr. (In other words, no way you can get to $0.24/shr even on the most aggressive of base assumptions).
Nevertheless, that's roughly $.60 in annual eps - which would be a 25% bump on consensus forecast for FY'07.
So ... if you believe this move will cause a 1% marketshift to Apple's ledger, then you would expect EPS estimates to be 25% too low, in which case it would be perfectly reasonable and rational to expect the stock to move up 25% in response as those estimates popped. Given that the stock is up roughly 15% from the announcement, then an investor might expect an additional 10% tacked on to this run.
OTOH, if the investor thought roni's judgment of "bigger than WinPod" was true ... then it's "To the Infinity ... and Beyond!"
Here's how those numbers shake out ... Roughly 95% or so of iPod Rev comes from "WinPods" (that assumes Mac owners buy 250% as many iPods per capita as Windows owners - a fairly conservative figure) - meaning "WinPod" will be worth roughly $9 Billion in Rev this year - or the equivalent of roughly 6.5 million PC units.
In short, in order to be "bigger than WinPod", this Base Camp would have to stimulate 7+ million additional PC unit sales (annually), generating $13.2 Billion in total Rev (CPU + "Hardware & Other" + "Software & Other"), which would in turn generate an additional $2.4 billion in operating income, which produces (on current share count) an additional $1.85/shr in EPS (annually).
Assuming the market would give AAPL a 30 multiple on that $1.85 of additional EPS, that should add another $55 to AAPL.
So if you think this is "bigger than WinPod," then you believe AAPL should be fairly valued at roughly $120/shr today. And presuming 25% growth in '07-'08, you should expect it to trade at $150/shr by year's end.
If, OTOH, you think AAPL should trade at a 40 multiple not a 30 -- as it did most of last year -- then you'd believe the stock is worth $160/shr. today, and be looking for $200/shr by year's end.
I'm sure it'll be viewed as the proverbial skunk at the garden party for me to say this, but surely I can't be the only one who could easily name a half dozen times in the past few years when the analysts all came trotting out declaring some new introduction would "double market share" or "add at least 1% to market share" or "maybe not double market share from 3% to 6%, but surly will add at least 1%-2%". Each time, the crowd cheered and people in the Mac investment community treated it like a fait accompli.
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