Analyst Actions: Apple, SanDisk, Broadcom
Needham reiterates strong buy
Needham analyst Charlie Wolf says that as anticipated, Apple (AAPL) easily beat guidance, reporting fourth-quarter EPS of $1.26 on $7.9 billion in revenue. Wolf says, as usual, the company's fourth-quarter guidance was downbeat, anticipating the recession. He notes, however, the astonishing news was non-GAAP EPS, which treats iPhone on a sales rather than amortization basis; on this metric, Apple earned $2.69. Wolf says with $27 of cash subtracted from the share price and fourth-quarter GAAP income annualized, the stock is now trading at less than 6 times non-GAAP EPS. He maintains a $240 price target. Wolf reduced his $5.95 2009 GAAP EPS estimate to $5.65.
JPMorgan resumes coverage, downgrades
Samsung ended its bid for SanDisk (SNDK). JPMorgan analyst Paul Coster cut his rating on SanDisk to underweight from neutral. He believes the company will return to profitability no sooner than 2010, and in doing so will fail to restore operating margins to peak levels. Coster thinks the stock is currently overvalued set against his 2010 forecast, and expects it to underperform the mean of his coverage. He sees a $1.07 2008 pro forma (PF) loss per share and a 74 cents 2009 PF loss. Coster set his December 2009 price target of $8, based on 12x his 65 cents 2010 PF EPS estimate. the analyst says his multiple is close to the historical trough for SanDisk, justified by uncertainties of the NAND space.
Baird ups to outperform
Broadcom's (BRCM) third-quarter earnings rose sharply. Baird analyst Tristan Gerra says he sees the company gaining market share in 2009, notably in mobile phones, Internet protocol televisions (IPTVs), and digital TVs. Gerra says Texas Instruments' (TXN) de-emphasis of its wireless business presents opportunities for Broadcom, now a leader in wireless systems on a chip integration. He adds that high R&D spending should lead the company to outperform peer growth, partially offsetting weakening end-demand trends. Despite the recommendation upgrade, Gerra cut his $1.72 2008 EPS estimate to $1.66 and his $1.60 2009 forecast to $1.19, citing weaker-than-expected fourth-quarter guidance issued by the company.