Shares in Apple Inc. fell Monday after Thomas Weisel Partners lowered estimates for 2009 and 2010, and cut his price target for the stock. In a research note obtained by The Mac Observer, analyst Doug Reid lowered both his profit and sales estimates for the company citing economic worries, though he stressed that he felt the stock was "undervalued."
Mr. Reid cut his price target from US$130 to $120, and he lowered his estimates for the current March quarter from $8.3 billion to $7.9 billion, a figure that still represents year-over-year growth of 5%. He lowered profit estimates to $1.05 per share from $1.10.
For fiscal 2009, Mr. Reid lowered his profit estimates to $5.10 per share, down from $5.31, while he lowered his revenue estimates to $37.1 billion to $35.5 billion. For fiscal 2010, he lowered profit estimates to $5.99 per share from $6.55 per share, and revenue projections to $41.1 billion from $43.4 billion.
The primary reason for the estimates reduction is the slowing global economy, which Mr. Reid said could hit Mac and iPhone unit sales.
Despite this realigning of his estimates going forward, Mr. Reid stressed to his clients his "Overweight" rating on the stock, a rating that technically means he is advising investors to include more of Apple than other stocks in the same sector.
"Despite our reduction in estimates," he wrote, "we believe AAPL shares are undervalued given the company's strong cash generation capabilities, balance sheet, and clear Mac market share gain momentum."
He cited three main reasons for this, including: "1.) Lower priced all-in-one desktops released on March 3, 2009; 2) Positive impact on Mac unit sales of introduction of DRM free music on iTunes at Macworld on January 6, 2009; and 3.) continued momentum from the company's refreshed MacBook line released on October 14, 2008."
He also said that he expects Apple to continue to gain market share for its Macintosh computers, writing, "We expect Mac market share to increase from 3.3% in CY08 to 3.7% in CY09."
If investors were paying attention to Mr. Reid's research note, they appeared to have been more concerned with the negative aspects --perhaps because Dow Jones's Ben Charny covered only those negative aspects, leaving out the Overweight rating and Mr. Reid's upbeat comments about AAPL being undervalued).
AAPL slipped further into negative territory, continuing Friday's losing session that was sparked by a research note from JP Morgan also lowering estimates.
AAPL closed at $83.11, a loss of $2.19 (-2.57%), on moderate volume of 24 million shares trading hands.
*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.