Bear Stearns lowers Apple estimates

Bear Stearns today lowered estimates for Apple based on iPod seasonality, but maintained its "outperform" rating due to valuation and predicted second-half strength. "Our view is that investors should take advantage of current weakness, viewing Apple as a compelling second-half play, though the risk is that our outlook is somewhat based on products not announced or seen yet," analyst Andrew Neff wrote. Cutting his fiscal third-quarter iPod unit estimate from 8.9 million to 8 million, Neff said Intel-based Macs and music will drive earnings in the second half of the year, according to Forbes.com. Neff lowered fiscal 2006 and 2007 earnings-per-share estimates from $2.15 and $2.75 to $2.06 and $2.65, respectively.

The analyst also lowered Q3 2006 earnings per share to $0.45 cents from $0.48 cents on revenue of $4.44 billion. Apple is guiding for earnings per share of $0.39 cents to $0.43 cents on revenue of $4.2 billion to $4.4 billion, according to the report.

Neff said Apple's valuation looked attractive at 17 times his calendar 2007 operating earnings per share estimate, but reduced his calendar 2006 target from $94 to $90. The analyst said he remains a buyer of the stock, however.

"Apple's stock is dependent on major new product launches," Neff said. "We're comfortable that Apple will continue to innovate, which we reflect in its multiple, but the timing and customer reaction are always speculative."

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