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Unwarranted Q1 concerns weigh on Apple shares

Analysts for ThinkEquity Partners said Monday shares of Apple Computer appear to be suffering from unwarranted investors concerns over the company's first fiscal quarter of 2007, which runs through the holiday shopping season.

Analyst Jonathan Hoopes, who recently increased his price target on shares of the Cupertino, Calif.-based company to $100, noted in a research report that the stock has surprisingly underperformed relative to the major indices over the last week.

"In the five trading days after our price target raise, Apple shares handily outperformed the Dow Jones Industrial Average, the S&P 500, and the NASDAQ Composite Index," he wrote. "That said, Apple shares have since underperformed these indices."

In raising his price target on Apple shares two weeks ago, the analyst noted several fundamental milestones affecting the company, including strong high-end retail segment performance in September due to lower gas prices, high demand for notebook systems and a easing of concerns related to the stock options scandal.

"Given the three fundamental milestones mentioned above, we believe Apple's share price underperformance during the last five days is unwarranted," Hoopes wrote. "Moreover, we believe investors are overly discounting concerns about Apple's performance in the December quarter."

The analyst believes Apple is presently leveraging its core underpinnings in world-class software design. He expects the company over the next several quarters to significantly increase market share, experience above-industry unit shipment and revenue growth, and improve earnings power.

"Never, in the history of the PC, has a company been better-positioned than Apple is at this time to both gain share and improve profitability, in our opinion," he said. "In our opinion, Apple stock is positioned to outperform based on a series of potential quarterly catalysts we highlighted two weeks ago."

For the December holiday quarter, Hoopes is modeling Apple to report 16.8 percent yearly growth to $6.7 billion in revenue, compared to the 12.4 percent growth and $6.5 billion in revenue consensus estimates tallied from analysts who were polled by Thomson First Call.

Hoopes reiterates a "Buy" rating on shares of Apple.