In the analyst's Equity Research Note, distributed yesterday, Wolf welcomes Apple's release of a Windows-supporting iPod. He claims: “Apple CEO Steve Jobs saves the day.”
The Windows-supporting iPod ships August 24 – and iPod is already regarded as the best-in-class portable-music player by reviewers, the analyst claims.
Wolf explains: “Based on analyst IDC's recently revised forecast of portable-music-player sales (25 million), and our assessment of the demand curve for portable-music players, the Windows version of the iPod could capture 20 per cent of the market. The revenue potential for Apple could be huge.”
The analyst claims: “This translates into a $1 billion revenue opportunity, and a $0.35 per share contribution to Apple's earnings.
“Even if IDC's forecast was halved, iPod would still represent a $500 million earnings opportunity for Apple.”
The analyst concludes: “The moment of truth will come in the Christmas selling season. If portable music players continue as one of the few hot markets in the consumer electronics industry, Apple could have a huge winner on its hands.”
“Given the sorry state of the PC market, we expect Mac revenues to be flat over the next 12 months. So the iPod's a big deal, because it's Apple's only near-term growth story.”
Wolf's price target for Apple shares sits at $22 at present. The analyst rates the company's shares as a Buy.
However, Wolf warns: “The assumption is based on a model that assumes Apple will grow revenues at a 5 per cent annual rate, and achieve an operating margin of 7 per cent for the foreseeable future. If competition in the PC market prevents Apple from capturing market share and achieving these assumptions, our $22 price target is at risk,” the report explains.