Bear Stearns holds rating on Apple, weighing risk vs. reward
Financial research firm Bear Stearns in a note to investors this week spoke enthusiastically about the growth potential of Apple's new product portfolio -- but warned that it could all come crashing down if the company is dealt the wrong hand.
In a research note issued to clients on Wednesday, analyst Andrew Neff expressed a cautious optimism, holding his ground on estimates for Apple's future despite jitters over stock options and other threats that could potentially dampen the electronics firm's spirits. Still, the analyst maintained his prediction that Apple's shares would top $130 by year's end.
Most of the newfound courage in the stock came from the quickly swelling Apple lineup spurred on by the Apple TV and iPhone, which Neff sees as ending a roller-coaster ride of company fortunes that depended almost exclusively on sales spikes triggered by new hardware and software.
"Before, Apple launched 'insanely great' products," he wrote. "But investors had no idea what, if anything, would come next and when it might happen."
Neff also contended that the Apple TV and iPhone were just tips of a much larger spear. Expansion will dominate 2007 for Apple in his view, with every line potentially growing larger. Apple TV in particular, he said, represents just a small hint of what was to come for the Cupertino-based company's increasing presence in the living room and could quickly spawn PVRs or even hybrid TV and media hub combinations. Video would be "next year's story," he added, comparing the Apple TV's current narrow focus to the iPod's early role as a niche-filler.
Even Mac share could break out of its deadlock, according to Neff. He told investors not to dwell too heavily on Apple's existing models, explaining that 2007 was the company's time to experiment with its computers, possibly creating ultra-portables, media hubs, and Macs priced below the $599 threshold of today's Mac mini.
Nevertheless, skepticism clouded at least some of the analyst's outlook. The presence of Apple chief executive Steve Jobs was identified as the single most polarizing factor. Jobs is "the heart and soul" of Apple, he said, and would bode well for the company as long as he stayed but would be "sorely missed" if federal investigations or other events forced his exit.
Neff also raised concerns over the possibility that Apple has hit its growth ceiling, especially in terms of breaking the historically unshakeable grip of Microsoft over the computer market. But at the same time, he noted that the iPod's "halo" effect appeared to be ongoing in spite of worries that the music player market could soon settle.
Overall, the negative factors of Jobs' potential departure and Apple's habitual difficulty with expanding its base weren't enough to dissuade Neff from holding to an Outperform rating on the stock and urging investors to buy on advice that the company had strengthened its line.
Apple now has "some sense of what is down the road," the analyst wrote.
In a research note issued to clients on Wednesday, analyst Andrew Neff expressed a cautious optimism, holding his ground on estimates for Apple's future despite jitters over stock options and other threats that could potentially dampen the electronics firm's spirits. Still, the analyst maintained his prediction that Apple's shares would top $130 by year's end.
Most of the newfound courage in the stock came from the quickly swelling Apple lineup spurred on by the Apple TV and iPhone, which Neff sees as ending a roller-coaster ride of company fortunes that depended almost exclusively on sales spikes triggered by new hardware and software.
"Before, Apple launched 'insanely great' products," he wrote. "But investors had no idea what, if anything, would come next and when it might happen."
Neff also contended that the Apple TV and iPhone were just tips of a much larger spear. Expansion will dominate 2007 for Apple in his view, with every line potentially growing larger. Apple TV in particular, he said, represents just a small hint of what was to come for the Cupertino-based company's increasing presence in the living room and could quickly spawn PVRs or even hybrid TV and media hub combinations. Video would be "next year's story," he added, comparing the Apple TV's current narrow focus to the iPod's early role as a niche-filler.
Even Mac share could break out of its deadlock, according to Neff. He told investors not to dwell too heavily on Apple's existing models, explaining that 2007 was the company's time to experiment with its computers, possibly creating ultra-portables, media hubs, and Macs priced below the $599 threshold of today's Mac mini.
Nevertheless, skepticism clouded at least some of the analyst's outlook. The presence of Apple chief executive Steve Jobs was identified as the single most polarizing factor. Jobs is "the heart and soul" of Apple, he said, and would bode well for the company as long as he stayed but would be "sorely missed" if federal investigations or other events forced his exit.
Neff also raised concerns over the possibility that Apple has hit its growth ceiling, especially in terms of breaking the historically unshakeable grip of Microsoft over the computer market. But at the same time, he noted that the iPod's "halo" effect appeared to be ongoing in spite of worries that the music player market could soon settle.
Overall, the negative factors of Jobs' potential departure and Apple's habitual difficulty with expanding its base weren't enough to dissuade Neff from holding to an Outperform rating on the stock and urging investors to buy on advice that the company had strengthened its line.
Apple now has "some sense of what is down the road," the analyst wrote.
Comments
If Leopoard does better than expected in terms of reaching switchers, then I think a trend away from Microsoft will be started.
Not that I think MS is anywhere near dead, but if 5 percent of Windows users switch to Mac, that's a lot of folks.
I am sitting on all my APPL stock for the next 5+ years
Same here.
I am sitting on all my APPL stock for the next 5+ years
Saaaame here.
I am sitting on all my APPL stock for the next 5+ years
My plan as well. I hope to pick up more as the funds become available.
Meanwhile I bought some other assets, but I am thinking of moving back into AAPL while it's in the $80s. It really should be cracking $100 once the new ipod comes out and peoples minds explode yet again over its beauty.
The analysts quoted above are overstating the risks. Most companies have far greater risks than Apple Computer, Inc. If you want to talk about long-term risk, we need to discuss MSFT, big time. Do you really think MSFT will be in the world's top 20 firms in 2020?
Do you really think MSFT will be in the world's top 20 firms in 2020?
Yes. They aren't going to dry up and blow away anytime soon, kids.
The real risk to MSFT is that robust freeware can supplant it. After all, its software is not so amazing. It is a pain to switch to OpenOffice at the enterprise level, but in 5 years time, MSFT will be just one provider of MS-compatible software. Maybe not even the best one. For my money, OpenOffice already is robust enough for enterprise level Excel, with VBA coming momentarily. Then where will MSFT make money? Momentum alone does not sustain world-beating companies. IBM showed that. It takes 10 years, but eventually you fall.
Yes. They aren't going to dry up and blow away anytime soon, kids.
No, but they may lose their squirt
Apple now has "some sense of what is down the road," the analyst wrote.
Or is it that the analyst now has some sense of what is down the road?
Like: "it could all come crashing down if the company is dealt the wrong hand."... and then "the analyst maintained his prediction that Apple's shares would top $130 by year's end..."
Oh thanks for that - so what you just said was it could go up or down. Come on! Take a stand, man!
I have friends who are traders and portoflio managers - nothin' against them - all great minds - but they marvel at Apple. They just don't get it. They'll ask me how the company can possibly compete - it's amazing. The reason they ask? They don't USE Apple products! None of them have - the whole market is using PCs. Maybe an adventurous soul will have an iPOD, but for the most part it's PC all the way. Amazing.
Love this statement:
" Jobs is "the heart and soul" of Apple, he said, and would bode well for the company as long as he stayed but would be "sorely missed" if federal investigations or other events forced his exit."
WHO CARES! So they kick Jobs out - he'll form iSteveJobs, Inc. and be a consultant to the company - in fact, he'll proabably be better off so the govt won't chase him down. Do they really think this matters? Only if you're an analyst.
This is good:
"Neff also raised concerns over the possibility that Apple has hit its growth ceiling, especially in terms of breaking the historically unshakeable grip of Microsoft over the computer market. But at the same time, he noted that the iPod's "halo" effect appeared to be ongoing in spite of worries that the music player market could soon settle."
How can Apple hit a ceiling, if year after year they wow the industry. There IS no ceiling! Comparing them to Microsoft's share is a waste of time. Apple makes great products, has great service, and happy, loyal customers (for the most part) - THAT makes money. And the company has solid fundamentals - what more could you want?
My favorite:
Apple now has "some sense of what is down the road,"
Translation: "We now understand Apple is making some great stuff."
And lastly:
Overall, the negative factors of Jobs' potential departure and Apple's habitual difficulty with expanding its base weren't enough to dissuade Neff from holding to an Outperform rating on the stock and urging investors to buy on advice that the company had strengthened its line.
Okay - you've slightly redeemed yourself, since you're telling people to buy hands down. Good call. I suppose I shouldn't be so harsh on the analysts...then again, they only have 3 choices - buy, sell, or hold. If they buy, they have faith ; if they sell, they are scared ; and if they hold...well...that would mean there could always be a fumble....
That said, this analyst may be covering his ass, but he is right about one thing. If Jobs is forced out of the company, the stock will TANK! I mean 10 point drops every day for a week. Will this value be regained? Yes, but thru those months I'm going to be showing a big loss!
Don't fool yourself, investors trade on rumors and speculation with Apple... Steve Jobs gives an air of growth to the stock and thus he is essential for the stock to grow and maintain its price.
Does anyone know what methods the SEC would use to kick SJ out? Would they need the approval of the board, or would they do a deal: "SJ leaves and we leave you alone"?
All I can say is that it would be irresponsible for the SEC to do this... they might trigger a minor recession in the tech sector!
Oh, how I love "analysts" - they seem akin to football commentators - they'll make statements just broad enough to cover their butts when things don't go the way they thought!
Like: "it could all come crashing down if the company is dealt the wrong hand."... and then "the analyst maintained his prediction that Apple's shares would top $130 by year's end..."
Oh thanks for that - so what you just said was it could go up or down. Come on! Take a stand, man!
Heh. It's AssCovering 101. Basically the analysts are saying, "Look, we got tons of AAPL we bought at like $50 or something. Then we picked up tons more during times when it slid to $60, $70, $80-ish in recent times. Since Prudential put out a statement, we're going to put out a statement too. Except, we're going to go the full hog and say $130! This is so it pushes AAPL past $100 and we'll sell more stock and make more money!!! Wooot!... And, just in case anyone is actually paying attention, we'll come up with some obvious "well, there is this risk...." so that it doesn't look so blatantly obvious we're trying to drive the stock up higher by setting $130 and coming up with all these mythical new products which "Expansion will dominate 2007 for Apple"...
I'm holding my stock as well...
That said, this analyst may be covering his ass, but he is right about one thing. If Jobs is forced out of the company, the stock will TANK! I mean 10 point drops every day for a week. Will this value be regained? Yes, but thru those months I'm going to be showing a big loss!
Don't fool yourself, investors trade on rumors and speculation with Apple... Steve Jobs gives an air of growth to the stock and thus he is essential for the stock to grow and maintain its price.
Does anyone know what methods the SEC would use to kick SJ out? Would they need the approval of the board, or would they do a deal: "SJ leaves and we leave you alone"?
All I can say is that it would be irresponsible for the SEC to do this... they might trigger a minor recession in the tech sector!
Yeah I don't know how things work. There is the SEC and then there is FBI San Francisco. So....
My prediction as I posted in some other thread is that SEC and/or FBI SF will take down the scapegoats identified previously - Fred Anderson and Nancy Heinen.
Worst for Apple is some sort of a fine.
Maybe FBI will press charges against Anderson and Heinen, and SEC will fine Apple. And that's all folks. Next scandal, please.
...Neff also raised concerns over the possibility that Apple has hit its growth ceiling, especially in terms of breaking the historically unshakeable grip of Microsoft over the computer market...
1. What growth ceiling as it is?
2. What growth ceiling now that iPhone is coming out?
3. Um, APPLE IS NOT TRYING TO BRING DOWN MICROSOFT!
They're not even called "Apple, Computers" anymore.
Anyway, a rough dump of my prediction:
Even Mac share could break out of its deadlock, according to Neff. He told investors not to dwell too heavily on Apple's existing models [...]
The presence of Apple chief executive Steve Jobs was identified as the single most polarizing factor. Jobs is "the heart and soul" of Apple, he said, and would bode well for the company as long as he stayed but would be "sorely missed" if federal investigations or other events forced his exit.
Neff also raised concerns over the possibility that Apple has hit its growth ceiling, especially in terms of breaking the historically unshakeable grip of Microsoft over the computer market.
To hope that Apple would break away from its niche market is just wishful thinking so long as:
1- Steve Jobs is the CEO of Apple;
2- Steve Jobs refuses to allow Dell, HP, Gateway and Lenovo to install Mac OS X on a minimum of 20% of their computers.
If you didn't notice, Apple is most rewarding financially for its CEO and executive vice-presidents who enjoy lavish, out of this world, insanely impossible, unwarranted and backdated stock option grants.
As a comparison, the CEO of Canada's largest bank got an unprecedented $6.5 million compensation for his 2006 performance:
1- Total bank assets for 2006 - $537 billion;
2- Total income for 2006 - $20.6 billion;
3- Net income for 2006 - $4.7 billion;
4- Earnings per diluted share for 2006 - $3.59.
5- Total shareholders? equity for 2006 - $22.1 billion;
6- Number of employees (full time equivalent) for 2006 - 60,858
Fear the day when some common sense and honesty prevail at Apple. This can be shareholder mandated or Fed mandated.
To hope that Apple would break away from its niche market is just wishful thinking so long as:
1- Steve Jobs is the CEO of Apple;
2- Steve Jobs refuses to allow Dell, HP, Gateway and Lenovo to install Mac OS X on a minimum of 20% of their computers.
If you didn't notice, Apple is most rewarding financially for its CEO and executive vice-presidents who enjoy lavish, out of this world, insanely impossible, unwarranted and backdated stock option grants.
As a comparison, the CEO of Canada's largest bank got an unprecedented $6.5 million compensation for his 2006 performance:
1- Total bank assets for 2006 - $537 billion;
2- Total income for 2006 - $20.6 billion;
3- Net income for 2006 - $4.7 billion;
4- Earnings per diluted share for 2006 - $3.59.
5- Total shareholders? equity for 2006 - $22.1 billion;
6- Number of employees (full time equivalent) for 2006 - 60,858
Fear the day when some common sense and honesty prevail at Apple. This can be shareholder mandated or Fed mandated.
There would be no Apple if it were not for Steve Jobs, it is as simple as that. The rest is a pointless discussion after that sinks in.
bwik
Do you really think MSFT will be in the world's top 20 firms in 2020?
Yes. They aren't going to dry up and blow away anytime soon, kids.
By then I think MSFT will join the likes of TWA and PANAM in our history books under "Remember These Companies?".