updated 11:00 am EDT, Wed August 16, 2006
Apple restatement risks
Analyst firm Merrill Lynch has concluded that Apple's restatement and delisting risks appear contained, following an assessment of risks related to stock option irregularities at Apple as well as Pixar. The firm further suggests that there are not yet enough facts to form a conclusion as to whether key executives may have been involved in creating options irregularities at Apple or Pixar, and assumes that Apple CEO Steve Jobs is not likely to have been involved. Analyst Richard Farmer warns, however, that a review of Pixar disclosures does not rule out the possibility that Jobs was involved in options backdating for that company during his role as CEO. "Jobs was a member of the board that made options decisions, and our analysis suggests these may contain irregularities," Farmer said. Merrill Lynch maintains its "buy" rating for Apple shares with a price target of $72.
The analyst also believes that Apple's assets are largely independent of management, and that consumers will buy Macs as well as iPods regardless of who is CEO.
"We acknowledge the stock would likely gap down, at least temporarily, if a key executive such as Jobs were to leave," said Farmer. "All else equal in our fundamental view, we would consider Apple executive related stock weakness to be a continued buying opportunity."