iPhone 4 Launch and Earnings Estimate Increases Fail to Ignite Apple Shares

Lines outside an Apple store on iPhone 4 launch dayLike a drunk coming off a night of partying, Apple (AAPL) shares were sluggish Friday -- closing down a slight 0.86% to $266.70 a share. Apple's share price performance seemed rather weak, despite its highly touted iPhone 4 launch Thursday and several Wall Street analysts raising their earnings estimates for the company.

Yair Reiner, an Oppenheimer analyst, increased his Apple earnings estimates to $14.52 a share for the current fiscal year, up from his previous forecast of $14.01, according to his research note released Friday. Reiner also also bumped Apple's price target to $345 a share from $320.

Launch Day Sales Estimate

And what was Reiner's forecast for Apple's iPhone 4 first-day sales? A whopping 1.5 million units. But even he notes that the basis for making such an estimate is rather sketchy. Writes Reiner:
Guessing launch-day iPhone sales has become something of a national sport, a bit like guessing whether Punxsutawney Phil will see his shadow. Fun but meaningless, especially given that Apple's initial sales are more a function of supply than demand. Still, for what it's worth, here's our guess: 1.5M. And here's the math: 600K pre-ordered in the U.S. + 100K nonreserved units sold day-of at Apple stores (average 500 per store) + 50k sold into Best Buy (~45 per store, according to our checks). Then multiply by two for international. We'll see.
Deutsche Bank analyst Chris Whitmore raised his estimates and price target for Apple earlier this week. He bumped his estimates significantly to $16 a share for the current calendar year from $14.50 a share, according to his research note. And for revenue, Whitmore is expecting $71 billion, compared with $64.6 billion. Driving the change in his estimates is Apple's "double-barreled product cycle" with both the iPhone 4 and the iPad releases this year. Whitmore also raised his Apple price target to $375 a share from $350 a share.

If You're A Phone Company, Act Like a Phone Company

But Trip Chowdhry, an analyst with Global Equities Research, says he's not surprised that Apple's shares failed to get a large lift from its iPhone 4 launch. He attributes the weak performance to reports of consumers' complaints over poor reception they're encountering when using the new iPhone 4.

"If you make a call and it drops 10 times a day, then you won't want to use the phone anymore. And no matter what Steve Jobs says, you can't ask people to hold the device in an unnatural way," Chowdhry says. "If you call yourself a phone maker, you better have the basics down, and making calls is basic. This tells you that Apple is still a computer company first, and not a communications company."

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