Recently reported iTunes sales were on the decline, stating although the music download store experienced a “healthy growth” for much of a 27-month period, the monthly revenue had “fallen by 65 percent with the average transaction size falling 17 percent” since January.

The Register‘s story was based on a phone conversation with Forrester Research analyst Josh Bernoff, who, according to the item, also “warned against extrapolating too much from the figures.”

But that didn’t stop the Register from slapping an “iTunes Sales ‘Collapsing'” headline on the story, causing word to spread that iTunes ain’t sellin’ like it used to.

Among the more interesting features of the report were details about iTunes customer buying habits, how 3.2 percent of online households bought at least one download, with most of those buyers making an average of 5.6 transactions and the median household making only 3 transactions in one year.

Sounding even gloomier, the median transaction was described as “slightly under $3.”

Although Forrester’s Bernoff warned against reading too much into the report, the researcher raised some interesting points in the Register‘s story, mainly that iTunes sales are not replacing CD sales, calling iTunes sales action “incremental” at best.

In fact, according to Forrester, when it comes to purchasing music via the Net, mail order CDs through sites like Amazon still rule, with consumers buying 1.6 CDs per quarter online.

But is the sky really falling at iTunes?

Disputing Forrester’s report is business analysis company Piper Jaffray, which said sales at the music online store were up for the first nine months of 2006 and the number of songs sold per week had risen 78 percent during the period compared to that of 2005.

“Contrary to recent reports suggesting sales on iTunes are declining rapidly, our analysis of Apple company data … shows strong growth (year over year),” wrote Piper Jaffray researcher Gene Munster, according to Reuters.

Why the difference in reports?

The data analyzed, as well as the sample size, seems to be a factor in the conflicting reports. Forrester’s research is based on some 2,700 iTunes debit and credit card transactions over the last year.

Meanwhile, Investor’s Business Daily quotes Munster as saying the data he studied came from Apple itself, and the sample Forrester analyzed was “too small to matter.”

And then there’s the Register‘s interpretation of Forrester’s study, which Forrester analyst Bernoff took to task on his blog. He wrote that the publication, along with Bloomberg, “decided to dive in and highlight one finding of the report – that iTunes sales had dropped in the first six months of this year. We got treated to wonderful headlines about iTunes sales ‘collapsing’ and ‘dropping’ and ‘plummeting’ and so on.

“Now for the record,” Bernoff continued, “iTunes sales are not collapsing. Our credit card transaction data shows a real drop between the January post-holiday peak and the rest of the year, but with the number of transactions we counted it’s simply not possible to draw this conclusion . . . as we pointed out in the report. But that point was just too subtle to get into these articles.”

Bernoff goes on to say that, rather than dropping, iTunes sales are leveling off. However, he also points out that it’s the record labels, not Apple, that should be worried.

“[Apple] makes its money mostly from iPods, and iTunes is just a way to make that experience better. It’s the music industry that has to worry, since the $1 billion a year or so from iTunes, globally, doesn’t nearly make up for even the drop in CD sales in the U.S., which are now down $2.5 billion from where they were.”

But the Register‘s doom-and-gloom story, along with other media outlets quickly picking up the “iTunes in trouble” meme, did have an impact. The price of Apple stock dropped 3 percent. However, after Morgan Stanley raised its target price on Apple from $90 to $110, Apple shares went up $1.80 in early trade on Nasdaq.

It kind of makes you wonder about the stock market’s perception of Apple. After all, it’s a computer company that also sells music. iTunes is an important Apple asset, but it’s not the company’s only asset. Apparently, that’s something investors failed to remember during the past week.