Analyst's estimates for unit sales over the weekend were volatile. David Bailey at Goldman Sachs estimates weekend sales to be near 700,000. Gene Munster of Piper Jaffray estimates that as many as 500,000 units were sold. Bill Shope at JP Morgan has one of the more conservative estimates, figuring that 312,000 units were sold:
"'We believe initial demand may have been disappointing, but it's still early,' Bill Shope, analyst at JP Morgan, said in a note to clients. 'We don't believe supply was much better than expected, so demand could be a bit light."'
This is a good point. The fact that the iPhone failed to sell out at a majority of stores means it failed to meet internal estimates, and it could be the reason for the sputtering stock price. The iPhone was most popular in California, a place where status symbols are of the utmost importance:
"Just about every Apple Store in California was out of the iPhone except for two in San Francisco. But in New York only one Apple Store, in Smith Haven Mall in Lake Grove, was reported out of the iPhone, while the other 11 stores in the state had them available, as did the 12 stores in neighboring New Jersey and Connecticut."
"Seattle's University Village Apple Store reportedly had the iPhone, but the other three stores in the state were out, while in Texas, the two Apple Stores in Austin were out of the phone, as was the Dallas store, but the other nine other stores in the state had the phone."
The iPhone seems to have struck out in the highly populated New England area; nevertheless, first weekend unit sales appeared strong, double what analyst expectations were prior to Friday. Can this pace continue? From Goldman Sachs:"we have increased our iPhone forecast to 5.25 million for calendar 2007 and 12 million for 2008, up from four million and 10.5 million, respectively."
Reaching for the stars, I guess. I think these are gross overestimates, especially if/when the consumer runs out of money and credit. Furthermore, I still believe that the lead-up to the release of the iPhone was overhyped. Apple has gained 45.6 percent since the first of the year, almost all of which was consumer expectations for the iPhone. Could it be that the frenzy Steve Jobs whipped up brought the majority of prospective iPhone buyers out this past weekend? It's quite possible that this past weekend was the exception and not the rule. This puts me at odds with most others:
"'The surge of sales to early adopters was strong, [but] we actually expect the hype to grow in the coming weeks,' said Munster, who holds an outperform rating and $160-a-share price target on Apple's stock."
As for my expectations, I followed the sheep with an estimate of about 150,000 sales for the weekend. I was wrong on that account, but right about the ill-effects the stock price would see. I stand by my prediction that the stock will retreat before significantly going up.
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Edited - 9:10 PM:
I failed to notice the story about Universal Music nixing a deal with Apple's iTunes, which certainly had a negative effect on the price of the stock:
"Universal Music Group, one of the world’s largest commercial music publishers, has turned down an opportunity to continue a long-term arrangement with Apple, a source confirmed to Macworld."
I don't know the extent to which this contributed to the stock decline, but it certainly opens the doors for more iTunes problems:
"...it will give Universal some breathing room if, say, a big media company approaches them with a promising new way to distribute music digitally and wants to provide some oomph to its launch with exclusive, limited-time access to new releases from the label's hottest-selling artists."
"That would be hard to do under the kind of deals that the major music companies have signed with iTunes. Now, Apple won't have automatic access to all of Universal's music."
This opens the door for other companies in the recording industry to pursue similar arrangements with Apple. It will be interesting to see how this plays out.
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