Apple shares closed at $26.45 last night, as investors considered the value of the company's music initiatives.
With 50 million songs sold through iTunes Music Store and Pod mini's selling strongly across the US, investors are considering the impact on the company's bottom line as Apple approaches the end of its second quarter 2004 at the close of this month.
Schaeffer's Investment Research wrote: "iTunes continues to assert itself as the prime location for digital music." The report described the Apple's music service market popularity as "scoring a notable victory over any and all of its competitors."
Apple has expressed hope that it will sell 100 million tracks by April 28. The 50 million songs it confirmed it has sold so far do not include those downloaded as part of the Pepsi promotion.
Positive outcomes have generated positive results, Schaeffer's said: "The stock has been rallying sharply over the past few weeks, registering a new high last Wednesday despite the rockiness plaguing the broader market," the anlaysts wrote. "The stock is now pulling back to digest its gains", it said.
Prudential Financial analyst Steve Fortuna also issued an advisory note yesterday in which he reasserted his 'neutral' rating on Apple, repeating his target share price of $22 for the company.
"Apple's valuation has become expensive," he wrote, adding: "investors have been lured by the success of the iPod and iTunes (as well as associated opportunities for higher CPU attach rates)."
"Though we remain impressed with Apple's innovation, product portfolio, and store success, we do not yet have the necessary conviction that iPod or iTunes momentum will carry through materially into the company's other, more important, core product areas," Fortuna added. He predicts revenues of $1.805 billion for the current quarter.
Fortuna's temerity was tempered by news from UBS yesterday, whose reaction to Apple's continued music success was to upgrade its Apple rating from neutral to buy with a $28 target price.
Schaeffer's summed up yesterdays investor market movement as follows: "Speculators are looking to the distant future, trading call and put positions in the January 2006 series, most notably at the 30 strike."