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Word on the Street

Analyst Actions: Apple, Plantronics, Red Robin Gourmet Burgers


RBC Capital analyst Mike Abramsky says he is cutting Apple (AAPL) to underperform from sector perform and his $125 price target to $70 on reduced growth expectations, visibility and near-term leadership uncertainty. He sees a revaluation in the stock toward a market multiple.

Abramsky notes CEO Steve Jobs' unexpected medical leave raises near-term uncertainty on leadership; Jobs is widely viewed as Apple's chief innovator, dealmaker and leader, and is deeply involved in minute decisions and inextricably tied to Apple's brand.

He cuts $38.1 billion fiscal year 2009 (September) revenue estimate to $36.2 billion and $5.07 EPS to $5.00; $46 billion for fiscal year 2010 to $42.1 billion and $6.43 EPS to $5.92.


Morgan Keegan analyst Tavis McCourt says Plantronics (PLT) pre-released third quarter results of $184 million revenue and $0.11-$0.12 non-GAAP EPS, well below his $207 million and $0.30 estimates.

McCourt says bluetooth headsets appear to be the main source of weakness. He notes PLT plans to reduce headcount by approximately 18% and trim spending in other areas to cut $50 million from opex in fiscal year 2010 (March).

While the cost savings are very accretive to EPS, he says the shares are trading (pre-open) at 12 times his $1.01 2009 EPS estimate. Given the uncertainty surrounding PLT's businesses (particularly consumer), he thinks this multiple could compress, and thus downgrades to market perform from outperform.


Red Robin Gourmet Burgers (RRGB) announced it will take a first quarter charge. Piper Jaffray analyst Nicole Miller says the company also announced a cut to 2009 marketing budget, making her prior investment thesis (which was driven by a national TV campaign) somewhat irrelevant.

Miller believes that the company's differentiation, or its strategy to grow brand awareness, is at risk. She thinks about $18 million in savings from marketing reduction offset by about 200 bps in lost same-store sales, which, in combination with the already soft consumer market, puts margins at even greater risk.

She cuts $1.72 2008 EPS view to $1.70, $1.80 for 2009 to $1.65, and $18 price target to $13; the stock was rated buy.

All of the views expressed in this research report accurately reflect the research analyst's personal views regarding any and all of the subject securities or issuers. No part of analyst compensation was, is or will be, directly or indirectly related to the specific recommendations or views expressed in this research report. Standard & Poor's Regulatory Disclosure

Any advice, analysis, or recommendations contained in articles labeled "Insight from Standard & Poor's" reflect the views of Standard & Poor's, which operates separately from and independently of BusinessWeek Online. It is possible that BWOL may from time to time publish information that is not consistent with advice, analysis, or recommendations that are published by Standard & Poor's. Standard & Poor's and BusinessWeek Online are each units of The McGraw-Hill Companies, Inc.

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