Analyst: 'Apple Shares Not So Pricey After All?'

Piper Jaffray analyst Gene Munster on Thursday issued a research report in which he looked at Appleis share price compared with three hardware and three software competitors: Dell, IBM, HP, Adobe, Autodesk, and Microsoft. He concluded that the companyis stock wasnit "so pricey after all," despite sentiment on Wall Street that it trades at a premium price and thus has no room for growth.

The analyst wrote: "We believe the best valuation metric to provide a parallel comparison between AAPL shares and its hardware and software comps is: P/E/G [Price-to-earnings ratio divided by projected growth rate] excl. cash. Based on this metric, AAPL shares are priced below the relevant comps. Our take is that AAPL shares do not trade at a premium valuation."

He added: "Clearly the right valuation metrics to use on any given company are up for interpretation, but we believe this method provides the most consistent strategy for comparison."

Gene Munsteris comparison table

The analyst concluded by noting: "We believe Apple will continue to outpace the growth of its competitors in the coming years and therefore AAPL shares should trade at a premium relative multiple based on P/E/G (excl. cash). We continue to believe Mac market share will grow through 2H CY06 and CY07 resulting in strong earnings growth (Mac market share growth drivers: 1) Intel transition complete, 2) Boot Camp effect, 3) iPod halo effect.

"Assuming Mac market share does grow over the next two years, we believe on a P/E/G (excl. cash) basis AAPL shares will move above its comps."

Mr. Munster retained his "Outperform" rating on Appleis stock, with a US$99 price target. He also issued a report in reaction to Appleis settlement with Creative. We will incorporate his comments in an article to be published later on Thursday.

At 12:57 PM EST on Thursday, Apple shares were selling for $67.37, up 0.09% for the day.

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