Bear Stearns: Current Apple Weakness Is A Buying Opportunity (AAPL)

The Consumer Electronics Stock Blog picks up a recent research note from Bear Stearns analysts Andrew J. Neff, William Hand and Ted Chung that downplayed "current 'investor anxiety' for Apple (AAPL) in light of reports that falling NAND memory pricing signals weakness in iPod sales." Key points from the note include:

• While there is concern surrounding demand for AAPL’s iPod and Macs, it appears to us that much of the concern – based on Asian channel checks – reflect already expected seasonal patterns and reductions as component supply has improved. While we are carrying high estimates, we remain positive on the stock at current levels and reiterate our Outperform rating.
• Despite recent channel checks from Asia which imply iPod weakness, we remain positive as: 1) NAND order cancellations may relate to AAPL diversifying its vendor base and over-ordering to avoid supply constraints; 2) ODM production cuts likely reflect rationalization of optimistic targets entering the qtr and AAPL’s anticipated seasonal declines; and 3) our checks don’t suggest slowing demand.
• The sum total of these points suggest that iPod appears to be tracking down about 20-25% seq, which is still better than Street at ~9-10mm and in line w/ our 10.5mm est. While the Intel transition remains a near-term issue, the CPU biz is now only ~35% of revs, Adobe software w/ native Intel support could come by year end, and AAPL-branded software (Aperture, Final Cut Pro) is due by end of March.
• While we’re concerned about multiple reports of order cutbacks, we’re maintaining our ests for FY06 of $2.41 (incl. $0.14 in options) on revs of $22.2bn (up 60% YoY) and for FY07 of $3.01 (incl. $0.24 in options) on revs of $27.1bn (up 22% YoY). For 2Q06 (March), we’re maintaining EPS of $0.55 on revs of $5.1bn and above-consensus iPod units of 10.5mm – guidance is EPS of $0.38 on revs of $4.3bn.