UBS Warburg Maintains "Strong Buy" On AAPL, Raises 2002 Estimates

by , 12:00 PM EDT, May 20th, 2002

UBS Warburg analyst Don Young has raised his 2002 and 3rd fiscal quarter estimates for Apple by 2 cents per share. Mr. Young expects Apple to turn in a profit of 14 cents per share, up from 12 cents, for the June Quarter, which helped push 2002's estimates to 56 cents, up from 54 cents. Mr. Young also reiterated his "Strong Buy" rating from Apple, and specifically said that Apple was no longer "in a battle for PC market share -- instead we see the platform becoming a premium PC capturing selective PC demand" (as quoted from a Reuters report).

Mr. Young cites decreasing component costs for Apple as part of his increase in profit estimates. More from the Reuters report:

"Apple's good fortune of having strong iMac demand and a large backlog backfired on the company when component costs rose and created pressure on gross margins," he wrote in a research note.

"Now with component costs and particularly DRAM rolling over Apple will see a gross margin benefit," he said referring to the memory chips used in personal computers.

"In addition, our retail channel tracking shows iPod sales building, indicating a potential upside to our June quarter unit forecast of 52,000 units," he wrote, referring to Apple's digital music player. "We no longer view Apple as in a battle for PC market share -- instead we see the platform becoming a premium PC capturing selective PC demand. We reiterate our strong buy rating."

Rising component costs were cited as one of the reasons Apple had lowered gross margin estimates during the March quarter's conference call for the June quarter (see TMO analysis for additional information). Since that time, component costs have began heading lower again.

As of this writing, Apple is trading lower at 24.62, down 0.39 (-1.56%), on moderate volume.

You can read the full article at Yahoo!'s Web site.

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The Mac Observer Spin:

Note Mr. Young's comments about Apple having disassociated itself from the market share race, and having transitioned (back?) into a "premium brand." Those are strong words of praise from Wall Street in a market that is dominated by the commodity play of Dell.

Reuters Article