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Stock Picks: Apple, JPMorgan Chase, McAfee

Wall Street analysts offer buy, sell, or hold opinions on stocks in the news on July 15

Apple: Janney Montgomery Scott equity analyst William Fearnley Jr. maintained a buy rating on shares of Apple (AAPL) on July 15. He raised a fair value estimate on the shares to $330 from $320. In a note, Fearnley said his industry contacts indicated that sales of the company's Mac and iPods have been in line with the company's expectations. He said the iPad "continues to sell well and above reseller expectations." He raised his estimate for iPad unit shipments for fiscal 2010 (ending September) to 7.4 million, from 6.5 million, and for fiscal 2011 to 17.9 million, from 16.6 million. The analyst said sales of the new iPhone 4 were "off to a strong start and already on backorder." He hiked his forecast for iPhone unit shipments for fiscal 2010 to 36.7 million, from 36.2 million, and for fiscal 2011 to 44.5 million, from 43.3 million. "The big question is if Apple addresses the antennae issue," the analyst wrote. Since Apple released the iPhone 4 on June 24, users have complained about losing reception when they cover the lower-left corner of the device. Consumer Reports said this week it wouldn't recommend the phone because of the problem. Apple will hold a press conference on July 16 to discuss the device, an Apple spokesman, Steve Dowling, said on July 14. He declined to elaborate on what will be discussed. "[We] believe a bumper [iPhone case] voucher for [around] $30 is the most likely solution in our view … not a recall," Fearnley said. Apple last month advised users to buy a case or avoid gripping it in the lower-left corner "in a way that covers both sides of the black strip in the metal band" that acts as the device's antenna. The analyst raised earnings per share (EPS) estimates for fiscal 2010 to $14.06, from $13.85, and for fiscal 2011 to $16.61, from $16.23. JPMorgan Chase: Standard & Poor's equity analyst Matthew Albrecht maintained a strong buy rating on shares of JPMorgan Chase (JPM) on July 15. He raised a price target on the shares to $50 from $48. On July 15, JPMorgan, the second-biggest U.S. bank by assets, said second-quarter profit rose 76 percent, more than analysts estimated, as a reduction in provisions for soured mortgages and credit-card loans buoyed results. Net income climbed to $4.8 billion, or $1.09 a share, from $2.72 billion, or 28¢, in the same period a year earlier and from $3.33 billion in the first quarter, the New York-based company said in a statement. The per-share earnings compared with an average estimate for adjusted earnings of 71¢ projected by 22 analysts surveyed by Bloomberg. Second-quarter revenue fell 7.6 percent, to $25.6 billion. Fixed-income revenue was $3.6 billion, compared with $4.9 billion a year earlier and $5.46 billion in the first quarter. While home-lending and credit-card losses continued to weigh on earnings, the company set aside fewer provisions for future losses in both divisions. Retail banking earned $1.04 billion, compared with a $131 million net loss during the first quarter and a $15 million gain a year earlier. The division benefited from a reduction in provisions to $1.7 billion from $3.73 billion the prior year, JPMorgan said. Credit-card services earned $343 million, compared with a net loss of $303 million in the prior three months and a $672 million loss a year earlier. JPMorgan reduced provisions against future losses by $2.4 billion. In a posting on the S&P MarketScope service, Albrecht said JPMorgan's second-quarter EPS beat his estimate of 75¢. He noted that "loan balances continue to decline and the net interest margin fell, but loan loss provisions were much lower than we anticipated." Albrecht said the company's nonperforming assets have been declining, suggesting further releases of funds from loan-loss reserves are forthcoming. "The firm has also begun to repurchase shares, its first capital redeployment in some time, and we expect a dividend hike in '11," the analyst said. Albrecht raised EPS estimates for 2010 to $3.71 from $3.00, and for 2011 to $4.38 from $4.08. McAfee: RBC Capital equity analyst Robert Breza lowered a rating on shares of McAfee (MFE), the second-biggest maker of security software, to sector perform from outperform on July 15. Breza said in a note that while he expects the company to post "good" second-quarter results on July 29, he believes McAfee could be at risk for reduced analyst earnings estimates due to a prolonged economic recovery, an increasingly competitive environment that could pressure pricing, and tougher comparisons with prior-year periods due to foreign exchange risk. The analyst said that in 2011, he believes the "incremental consumer PC buyer may be absent from the market, opting for an iPad or other tablet-style device." He said enterprises may revert back to "normalized spending patterns" after increased IT spending early in 2010. Breza kept a 2010 EPS estimate of $2.58 and cut a 2010 forecast to $2.91 from $2.98.

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