Sweeter at Apple?

Apple Computer (AAPL ) is one stock that has yet to join the market's resurgence from October lows--and the more recent tech rally. Trading at 26 in April, Apple has fallen to 15. It hit 75 in 2000, when it earned $2.18 a share on sales of $8 billion. In 2001, sales tumbled to $5.3 billion, and a loss of $25 million drove the stock down to 14. But in fiscal 2002 ended Sept. 30, Apple snapped back: It earned $65 million, or 33 cents a share, on sales of $5.7 billion--but investors weren't biting. The sluggish economy and stiff price pressure in PCs have cooled their interest.

Still, some pros believe Apple will kick higher starting this month. Says one hedge-fund manager who has been buying: "Any uptick in sales [which he expects soon] will catapult the stock back to the mid-20s." An upgrading of computers bought about five years ago will help push sales up, he says. Traffic at Apple Stores has been good, he notes, aided by new products, including iPod, an MP3 player.

Few analysts are high on Apple, but Charles Wolf of Needham, who rates the stock a buy, says the company's foray into retail mall outlets has attracted visitors at a "rapid pace." He expects Apple to earn 40 cents a share in 2003, vs. Thomson First Call consensus of 24 cents.

Kevin Hunt of Thomas Weisel Partners says the stock, at the low end of its historic range and cheaper than its peers, is attractive long-term. "Apple is poised to reemerge as a growth story once overall PC spending resumes," he says.

By Gene Marcial

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