Charles Lemonides, chief investment officer of ValueWorks, thinks that Apple and EarthLink are two value stocks with strong growth prospects though they’re down from, respectively, $75 to $21 and $25 to $10, compared to a year ago.
Lemonides told Business Week Online that Apple is a bargain and figures it’s worth 45. He values Apple’s operating assets at US$30 a share and its cash and marketable securities at nearly $15.
Lemonides thinks Apple will break even in 2001 ending Sept. 30 and earn $1.50 a share in 2002, as the economy stabilizes and new products kick in. Apple has done well with new products in recent years, but the PC sales slump hurt earnings, he said in the story.
EarthLink is a value play — and a takeover target — now that it has amended a three-year pact with Sprint, which owns 27 percent of EarthLink, Lemonides added. The revised pact scraps Sprint’s right to acquire EarthLink and opens the door for other EarthLink mergers. Analyst Frederick Moran of investment firm Jefferies told Business Week Online that EarthLink is attractive to an outfit seeking to bulk up its Internet operations to compete with AOL Time Warner. Microsoft’s MSN unit is a likely buyer, added Moran, who values EarthLink at 15 based on its 5 million subscribers.