Barclays Sees Compelling Value in AAPL, Projects Black Friday Discounts

by , 5:40 PM EST, November 12th, 2008

Barclays analyst Ben Reitzes has maintained his Overweight rating on AAPL, telling clients in a research note obtained by The Mac Observer that, "we believe Apple's valuation is compelling" given the US$27 per share in cash holdings and the company's substantial free cash flow ($10 per share). In addition, Mr. Reitzes told clients he expects Apple to offer Black Friday discounts this year.

Macs

Expect the company to be more aggressive than usual in its one-day sale," Mr. Reitzes wrote, "perhaps with $100 off a few Mac models and discounts on several iPods."

Like many analysts, however, Mr. Reitzes wants to see Apple get even more aggressive in its pricing, "given obvious weakness in the economy." He believes that Apple could absorb such discounts due to its high margins, and this could be important this holiday season in the face of at least three Windows and Linux laptop computers being advertised at $299 for Black Friday.

iPods

Barclays currently projects iPod sales to be down 13% year over year during the December quarter, but so far the data shows iPod sales for the first five weeks of the quarter to be down just 5% year over year, representing an improvement over its own projections.

Indeed, in his research note, Mr. Reitzes said that Apple could benefit from some shoppers settling on a relatively low-priced iPod instead of other, more expensive, non-iPod electronic purchases over the holiday season.

iPhones

Apple could see price cuts for the iPhone, and Mr. Reitzes said that French carrier Orange would be discounting the 8GB iPhone to €99, down from €149. "We wonder if AT&T could follow shortly here in the US," he said in his note.

Rating & Daily Performance

Barclays is maintaining its Overweight rating on the stock, which means, "The stock is expected to outperform the unweighted expected total return of the sector coverage universe over a 12-month investment horizon." His target price for Apple's stock is $121 per share, unchanged from his last research note.

AAPL closed lower on Wednesday, following the general market trend on the day. The stock closed at $90.12 per share, a loss of $4.65 (-4.91%) on moderate volume.

*In the interest of full disclosure, the author holds a small share in AAPL stock that was not an influence in the creation of this article.  

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