CNN/Money Senior Writer Rips On Wall Street For Not Understanding Apple

by , 10:00 AM EDT, August 29th, 2003

How many times have you read at TMO that most Wall Street Analysts simply don't understand Apple? People like Rob Enderle, Andrew Neff, and Michael Hillmeyer consistently say what we editorially think are stupid things about Apple or AAPL. For many years, we have often published rants, deconstructions, and other opinions about some of the less than stellar things Wall Street has sometimes said about the Mac maker. Today, however, we bring you a note about someone at CNN/Money who effectively agrees with us, though he didn't name names. According to Paul R. La Monica, a senior writer for CNN/Money, Wall Street analysts simply don't get Apple. From the article:

Even though the company's iTunes online music store is doing boffo business and its new Power Mac G5 has been met with mostly great reviews, the consensus rating among Wall Street analysts for Apple's stock is a 2.9, according to First Call. Ratings go from 1 (a Strong Buy) to 5 (a Strong Sell). So this is essentially a Hold recommendation which, as most investors know, is a nice way of saying Sell. Only two of the 14 analysts that track the stock rate it a Buy.

In some ways, a wary stance makes sense. Shares of Apple have surged 61 percent since iTunes debuted in late April. And the stock now trades at more than 60 times earnings estimates for fiscal 2004, an extremely rich valuation.

But then again, why should investors listen to Wall Street? Analysts were even more bearish back in late April, when the stock was trading at $13.35, despite its $4.5 billion in cash and negligible debt load.

"Apple has always been the oddball in the computer industry but without question they come out with the best products and they have so much cash. I'm a big fan," said Matthew Kelmon, president of Kelmoore Investment Co, which owns 100,000 shares of Apple.

Mr. La Monica closes with the following:

Of course, investors should be more wary of the stock now since it has enjoyed such a sizable spurt in a relatively short period of time. But don't look to Wall Street analysts for clues to Apple's future. They just don't get it.

As a case in point, we offer you the fact that Merrill Lynch's Michael Hillmeyer has had a Sell rating on AAPL for the last several months. During that time, the stock has almost doubled. Yesterday, AAPL closed at a 52 week high of US$22.19 on moderately strong volume.

There is a lot more information in the full CNN/Money article, and we recommend it as a very insightful and informative read.

If you are interested in Apple's stock, join our forum members in the Apple Finance Boards, a moderated forum for Apple Investors and people who are interested in Apple's financial dealings. For other stories regarding Apple's stock activity, visit our updated Apple Stock Watch Special Report.

The Mac Observer Spin:

Preach on, Brother La Monica! It's not as if all Wall Street analysts fail to grok Apple. For instance, Dan Niles of Lehman Brothers, Kevin McCarthy of CS First Boston, and Richard Chu of SG Cowen, as well as a couple of others, are usually right on track with Apple, but many others aren't. We delight in seeing that message coming from a mainstream source such as CNN/Money. It's part validation, and part spreading the word, both of which are Good Things™ in their own right.

CNN/Money Article