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

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

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BW's Gene Marcial

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Wolf believes management is trying to demonstrate that Apple is no longer hugely dependent on Jobs' continued involvement and can display continued strength and much improved products even in the CEO's absence. The company has announced that Jobs would be returning to Apple by the end of June. But some still question whether that will happen because of his failure to attend the most recent Apple conference.

Most Analysts Are Bulls

What's increasingly becoming clear, Wolf says, is that Apple is "betting that its insurmountable lead in mobile software applications will eventually translate into a growing share in the smartphone market, if it is not already doing so," says Wolf.

How do analysts expect Apple's new products and price cuts will affect its profit outlook?

The combination of lower prices for the MacBook and performance enhancements could accelerate revenue growth and produce an upside to earnings estimates in the second and third quarters, figures analyst Kathryn Huberty of Morgan Stanley (MS). Hubert rates the stock overweight, with a 12-month price target of 180 a share. (Morgan Stanley does or seeks to do business with companies it covers).

She also expects increased demand for the lower-priced iPhone and the new iPhone 3G S will support her above-consensus estimates. Huberty expects Apple will earn $5.48 a share in fiscal 2009 (ending Sept. 30), $7.03 in fiscal 2010, and $8.83 in fiscal 2011. Apple earned $5.35 a share in fiscal 2008.

What will be debated is whether Jobs will, indeed, return to Apple by month's end. In spite of this unresolved question, Wall Street has stayed bullish on Apple, with 33 analysts recommending buying the stock and six rating it a hold, according to data from Bloomberg. Only two recommend selling it.

Did the Baton Pass Just Happen?

Some bulls already concede that Jobs won't come back. "Our biggest takeaway [from the conference] is the fact that the fairly major announcements were made by someone other than Steve Jobs," notes analyst Shaw Wu of securities firm Kaufman Bros., who rates the stock a buy. He assumes that the management transition is complete and that "there should be minimal concerns."

"We have the utmost respect for Steve Jobs and his contributions to Apple and position as one of the great thinkers and innovators of his time," says Wu. "We applaud him for being able to hand over the baton to the next generation of leaders at Apple." That, he says, signals that Apple has a "deep bench," and that the "unique culture that Steve Jobs created will continue to thrive and prosper."

But as of now, the big question is whether Jobs will return. The sooner that issue is resolved, the better for Apple and its stock. As it stands, a well-received public appearance by the man in the black turtleneck will give Apple bulls one more reason to smile.

Unless otherwise noted, neither the sources cited in Gene Marcial's Stock Picks nor their firms hold positions in the stocks under discussion. Similarly, they have no investment banking or other financial relationships with them.

Marcial writes the Inside Wall Street column for BusinessWeek. In 2008, FT Press published the book Gene Marcial's 7 Commandments of Stock Investing.