S&P Picks and Pans: Apple, Hovnanian, National Semi, Leap
S&P REITERATES BUY OPINION ON SHARES OF APPLE
Apple's CEO, Steve Jobs, offered an apology and a $100 credit at Apple stores to early adopters of the iPhone who faced a $599 price on the high-end model since its late June introduction until an abrupt one-third price cut to $399 on Sept. 5. We view the action as a positive step towards mending customer relations. We estimate that, with less than a million iPhones sold to date, and with the spur it gives to future store visits, the overall impact of the cost of the credits will be small. We are maintaining our EPS estimates, and also reiterating our 12-month target price of $170. /T. Smith-CFA
S&P MAINTAINS SELL OPINION ON SHARES OF HOVNANIAN ENTERPRISES
Hovnanian posts a July-quarter loss per share of $1.19, vs. $1.27 EPS one year earlier, wider than our $1.00 loss estimate as total revenues declined 27%. Writeoffs on land development and deposits were $108 million, above prior quarters, and we project writeoffs of $75 million for the October quarter. We are increasing our per-share loss estimates for fiscal 2007 (ending October) to $3.00 from $2.70 and fiscal 2008's to 75 cents from 25 cents. We are maintaining our 12-month target price of $10 based on 0.4 times our book value estimate, in line with small peer homebuilders. /K. Leon-CPA, M. Souers
S&P MAINTAINS HOLD RECOMMENDATION ON SHARES OF NATIONAL SEMICONDUCTOR
August-quarter EPS of 30 cents, vs. 35 cents one year earlier, is 6 cents ahead of our estimate. Better-than-expected earnings were aided by a higher gross margin and lower operating expenses. Sales rose 3.4% from May-quarter, which reflects strength in wireless handset and portable analog products. We believe that NSM is executing its high-end analog strategy effectively, and see a steady uptrend in earnings growth, but think this is reflected in the current share price. We are raising our fiscal 2008 (May) EPS estimate 15 cents to $1.40 based on August-quarter, but keeping our 12-month target price of $30, based on relative metrics. /J. Yin
S&P MAINTAINS HOLD OPINION ON SHARES OF LEAP WIRELESS
Leap announces that, with its advisors, it will formally review the unsolicited stock-based acquisition offer it received this week from peer MetroPCS (PCS; $28.10). Presently the deal is valued at about $77 a share. We believe that a higher offer is likely. In addition, Leap's CFO has resigned and its CEO will serve as CFO on an interim basis. Prior to the acquisition offer, Leap shares fell sharply on what we view as concerns about customer loyalty. /T. Rosenbluth
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