Apple Share Valuation Seen Above Fair Value
Ed Lin, 12.14.05, 10:55 AM ET
<<Bear Stearns analyst Andrew J. Neff downgraded Apple Computer (nasdaq: AAPL - news - people ) to "peer perform" from "outperform."
Neff said in a research report that valuation of the shares "reflects much of the near-term optimism and is 7% over our calendar 2006 year-end fair value."
However, the analyst said he is "still encouraged by emerging opportunities," such as Macintosh computers based on Intel (nasdaq: INTC - news - people ) chips, an iPod shuffle refresh, the emergence of the iPod as a media platform, and a potential entry into cell phones.
"From a valuation perspective, the stock is selling at a 75% premium to the market on calendar year 2006 operating earnings per share, which is a comparable premium the market has paid for other high-growth companies--Cisco Systems (nasdaq: CSCO - news - people ), Microsoft (nasdaq: MSFT - news - people )--during high-growth periods," Neff said. "While there is upside potential for earnings from higher Mac shipments (60,000 units upside is about 1 cent per share) and less-than-seasonal decline in iPods, we see a declining risk-reward profile."
For the fiscal first quarter ending December, Neff expects Apple to earn 65 cents per share on revenue of $5.85 billion.
The analyst said that despite potential for Apple to exceed his Street-high estimates, he maintained the fiscal 2006 earnings estimate at $2.12 per share, after options expenses, on revenue of $21.3 billion. Neff's sees fiscal 2007 earnings of $2.42 per share on revenue of $24.8 billion.>> |
