Apple Off-Key on iTunes

Apple (AAPL Quote) shares hit a monthly low Tuesday after a report on slowing song sales in the iTunes Music Store apparently tempered investor enthusiasm, but even the author of the report said Apple shouldn't worry too much.

Shares of the Cupertino, Calif.-based computer maker slid $2.61, off 2.9% to close at $86.14. Shares changed hands at heavier-than-normal volume.

For its digital music report, released Monday, Forrester Research analyzed 2,791 U.S. iTunes debit and credit card purchases between April 2004 and June 2006.

The report found that iTunes sales steadily increased from the beginning of the survey date to January 2006, but tapered off in the following months.

The number of monthly transactions rose from just two per 1,000 households in April 2004 to almost 17 in January 2006. At the same time, the average amount spent per purchase nearly doubled to $6.69.

But since January, the number of transactions fell 58%, Forrester found, and the size of each purchase declined 17%, resulting in a 65% drop in monthly iTunes sales.

"With only two years of full data, it is too soon to tell if this decline was seasonal or if buyers were reaching their saturation level for digital music," Forrester analyst Josh Bernoff wrote. "During the previous year, iTunes revenue fell after the holidays but rose significantly in May."