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Apple: Shinier Than Ever


How much higher can Apple (AAPL) go? The stock has shot from 72 a year ago to 140.76 on Sept. 19. Normally, Wall Street would sour on a stock after such an ascent. But of the 27 analysts who track Apple, 23 still recommend buying it, and 4 rate it a hold. None advise selling. No way are we selling, says Sean Kraus of Provident Investment Counsel, who bought at 47 in mid-2005 and hasn't sold a share. "Apple is still one of the best investments in technology," adds Kraus, who sees it hitting 180 in 12 months. Others see Apple even higher.

Kraus expects Apple to beat the Street's sales forecasts for iPhones, iPods, and Mac computers this fall. Long-term, he sees Apple creating new markets with "revolutionary" products and marketing muscle. Kathryn Huberty of Morgan Stanley (MS) (which owns stock and has done banking for Apple), who rates it "overweight," says the 30% price cut on iPhone was a "positive move" to stimulate holiday demand. Operating margins should expand, she adds, as Apple's innovative products continue to boost sales. She sees Apple earning $3.68 a share in 2007, $4.80 in 2008, and $5.99 in 2009, up from $2.18 in 2006. Could Apple hit 200? Piper Jaffray's (PJC) Eugene Munster has a higher forecast: 211 in 12 months.

Note: Unless otherwise noted, neither the sources cited in Inside Wall Street nor their firms hold positions in the stocks under discussion. Similarly, they have no investment banking or other financial relationships with them.

Oil moguL T. Boone Pickens may still have the Midas touch. A week after he disclosed a 9.9% stake in InterOil (IOC), the stock gushed from 28 on Aug. 8 to 40.75 on Aug. 13, the day the oil-and-gas explorer disclosed it found evidence of oil in its Elk-2 well in Papua New Guinea. Pickens didn't return calls. The latest drilling update on Elk-2 included data that gives a "very bullish picture of the prospects," says Wayne Andrews of Raymond James Financial (RJF), who rates the stock a strong buy. Additional tests are being done on Elk-2, which he expects will show positive data in October.

InterOil is building a fully integrated energy business in Papua. It operates the only refinery, owns a network of gas stations, and is exploring for oil in an 8.8 million-acre area. Based on its cash flow, Andrews expects InterOil to be in the black by 2008. His 12-month target for the stock is 65. Sal Ilacqua of Moness Crespi, which owns shares, says InterOil may hit 75 in a year. Not everyone is so upbeat. Some 10 million of InterOil's 29.7 million shares outstanding are controlled by short-sellers, who bet the stock, now at 35.60, will crash. InterOil CEO Phil Mulacek says Elk-2 has sufficient gas to supply a liquid natural gas plant InterOil is building in Papua in partnership with Merrill Lynch (MER) and Pacific LNG Operations.

Note: Unless otherwise noted, neither the sources cited in Inside Wall Street nor their firms hold positions in the stocks under discussion. Similarly, they have no investment banking or other financial relationships with them.

Bioenvision (BIVN), the small biotech that Genzyme agreed to acquire in May at 5.60 a share, may not close on the deal unless Genzyme (GENZ) raises its offer. Why? Some major Bioenvision stakeholders are up in arms: Genzyme's bid is "extremely inadequate," insists SCO Capital Partners, which owns 13.1% of Bioenvision. And Jesse Cohn of Elliott Associates, which owns 6.7%, is also "extremely dissatisfied." With its assets, Bioenvision is worth 13, he says. So far, Genzyme has acquired only 22% of the stock. A special meeting to vote on the bid will be held on Oct. 4. SCO wants Bioenvision to terminate the deal because the bid is less than 2008's expected revenues. CEO Steve Rouhandeh of SCO says Bioenvision is worth at least 12. Rouhandeh says his firm will put up a slate of new directors at the shareholders' meeting in December. The prize Genzyme seeks is exclusive rights to Clofarabine, a treatment for acute lymphoblastic leukemia, co-developed by Genzyme and Bioenvision. Neither company returned calls asking for comment.

Note: Unless otherwise noted, neither the sources cited in Inside Wall Street nor their firms hold positions in the stocks under discussion. Similarly, they have no investment banking or other financial relationships with them.


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