Wednesday’s analyst conference
with Apple executives, Wall Street analysts have reiterated their earlier predictions on investments in Apple.
Analyst Kimberly Alexy at Prudential Securities has reiterated her “accumulate” rating on the stock, setting a 12-month target price of $26.00 per share. Apple opened Thursday’s nasdaq trading at $21.62.
Alexy believes fundamentals for computer makers like Apple are improving, and that if inventories can return to normals levels of four weeks, Apple’s stock price will stabilize and grow slightly. Alexy said in her research note that the shares remain “attractively valued” and that her $26 price target is based on a 12 times multiple of calendar year 2002 estimates of $1.13 a share.
Analyst Andrew Neff at Bear, Stearns & Co. reiterated a “neutral” rating, as did Steve Fortuna at Merrill Lynch. Fortuna’s long-term rating on Apple stock is “accumulate.”
Neff said he cut his estimate to “around breakeven” from 12 cents a share for the quarter ending in June, and to a loss of 48 cents from a loss of 27 cents a share for financial year 2001.
Neff is concerned the decision to not pre-install Mac OS X in new Macs until July is a threat to near-term prospects in the fiscal third quarter. He believes customers could “pause” and not upgrade to OS X quickly. “The issue: won’t customers wait three months to get the highly anticipated Mac OS X?” Neff wrote in a report to customers.
Apple chief financial officer Fred Anderson told analysts yesterday that Apple is on track to reach its goal of a slight profit this quarter, and expects to see progressively increased profits and revenues in the third and fourth quarters. “We also believe strongly that we can drive substantial improvements going forward,” he said. “Gross margins definitely have to be rebuilt above 25 percent. Operating expenses have to be cut to around US$300-$400 million per quarter.”
Apple’s fiscal second quarter profits are estimated to end at $0.03 per share on revenues of approximately $1.4 billion. This reflects a rise of 50 percent from last month’s estimate of $0.02 per share, but still indicates earnings will fall compared to the prior year quarter of $0.64 by 95.31 percent.