Wells Fargo Cuts Applied Films to 'Market Perform'

Analyst Susan Crossley thinks Coke is exploring new methods of coating its glass bottles than the one it co-developed with Applied Film

Wells Fargo downgraded Applied Films (AFCO ) to market perform from buy.

Analyst Susan Crossley says one potential source of growth was for sales of a system it developed with Coca-Cola to coat bottles with a thin layer of silicon dioxide, thereby improving the bottle's barrier properties, enabling a widespread replacement of more expensive glass bottles. Now she believes Coke is exploring a lower-cost alternatives to Applied Films' system, leading her to lower her revenue, gross margin, and earnings per share estimates.

Crossley maintains her $0.22 fiscal 2002 (June) EPS estimate and cut her $0.61 fiscal 2003 estimate to $0.45; she also cut the $1.01 calendar 2003 to $0.74. Applying a 25 times multiple to her calendar 2003 estimate, Crossley values shares at $18.50.

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