Gene Marcial's Stock Picks June 9, 2009, 9:18PM EST

Marcial: Apple Shines, No Matter Who's in Charge

Analysts say Apple's well-received rollout of new products and price cuts proves it can be innovative even with Steve Jobs on medical leave

http://investing.businessweek.com/services/charts/chart.asp?sym=AAPL&d=365&w=600&h=300

Apple Inc.—52-week price

By Gene Marcial

BW's Gene Marcial

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Even though Steve Jobs took a medical leave in January, Apple Inc. (AAPL) remains as innovative and creative as it was in 1984 when Jobs unveiled the Macintosh to wide acclaim.

That creativity was reaffirmed on June 8 when the company held its Worldwide Developers Conference in San Francisco and unveiled new products and plans. The offerings appeared to meet with widespread approval from customers and shareholders alike—and Apple watchers showed little dismay that CEO Jobs didn't make an appearance.

Some analysts promptly raised their earnings estimates after Apple announced that it was cutting the price of its entry-level 8-gigabyte iPhone 3G to $99 from $199, and introduced a next-generation iPhone 3G S that's much faster and equipped with a compass and video camera. Apple also presented faster and lower-priced MacBook Pro laptops along with an updated Mac operating system called Snow Leopard.

Some investors took the new offerings as a signal that Apple without Jobs would continue to be a vibrant and imaginative company and should no longer be regarded as The Steve Jobs Show. It remains an enterprise, they say, with forceful products powered by its iPhone, iPod, and MacBook franchises.

Calming Investors

"Apple continues to meet or beat expectations with its innovative products," says Terry Morris, senior equity manager at National Penn Investors Trust, which has assets under management of $1 billion and owns Apple shares. And the stock, he adds, is still underpriced based on an estimated earnings growth rate of 18% to 20% over the next three to five years. More important, Apple "has momentum behind it, as people surely love to buy its products and its shares," he says.

Morris cautions, however, that after the stock's strong runup this year, from 78 a share on Jan. 20 to 141 on June 9, profit-taking could push it lower over the short term. But in 12 months Morris expects the stock to hit 162. It reached a heady 52-week high of 186.78 a year ago, on June 10, 2008.

Some Apple watchers view the developers conference as an attempt by Apple to focus more attention on its senior executives in the absence of Jobs, who has been on medical leave since January due to complications from pancreatic cancer. That has calmed investors, who had expected to see the CEO at the conference, notes Charlie Wolf, tech analyst at investment firm Needham. A longtime bull on the stock, who owns shares, he rates Apple a strong buy, with a 12-month target of 200 a share.