Bear Stearns downgraded Apple Computer (AAPL ) to peer perform from outperform.
Analyst Andrew Neff says the stock is near his $36.50 yearend target. He notes most of the catalysts (the new G5 iMac, Hewlett-Packard's iPod version, the PowerMac G5 cycle, and the fourth-generation iPod) is already priced into the valuation. He now sees a yearend 2005 target around $40, which is less compelling given that near-term drivers are less clear.
He notes challenges remain. Apple must balance the maturing PC business business, leverage the risks and opportunities of opening new stores, and be able to launch products that encourage an installed base to replace. Also, it must continue to encourage investors' optimism that it will increase its share and size.
Furthermore, there's some uncertainty about the potential impact of the digital-music business, given copyright issues that may be extended to device manufacturers. Neff keeps the 66 cents fiscal 2004 (Sept.) and 90 cents fiscal 2005 earnings per share estimates.