TMO Reports - Lehman Bros. Raises Apple FY06 EPS, But Sees Stock 'Locked in a Trading Range'

by , 2:40 PM EDT, June 28th, 2005

Lehman Brothers on Tuesday issued a research report that raised its estimate for Apple's FY06 (fiscal year 2006) EPS (earnings per share) from US$1.30 to $1.32, with FY07 EPS jumping from $1.40 to $1.52. However, the firm said in the note, obtained by The Mac Observer, that the company's stock "will be temporarily locked in a trading range until a meaningful new product cycle emerges (perhaps iTunes phones in July) or proof that PC growth is coming from a 'halo' effect rather than price point expansion and channel fill."

However, analyst Harry Blount raised his estimate of iPods shipped from 4.7 million units to 5.2 million, "based on continued expansion of distribution (HP for iPod mini, international sales, and Wal-Mart)." He also said that he believes "part of component supplier weakness potentially due to product transitions," a reference to the downgraded MP3 player sales forecast issued by Creative yesterday, which drove down the stock prices of SigmaTel, PortalPlayer and other companies that provide parts for the digital devices.

Mr. Blount has a $47 price target for the stock and gives it a "2-Equal Weight" rating, which means that the stock is expected to perform in line with the unweighted expected total return of the sector coverage universe over a 12-month investment horizon. Lehman Bros. makes a market in Apple securities, trades its shares regularly and has received non-investment banking related compensation from Apple during the past 12 months.

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