“Merrill Lynch’s Michael Hillmeyer has been one of Wall Street’s biggest bears on [Apple Computer, Inc.]. But Hillmeyer has been softening his tone of late. He upgraded his recommendation from sell to neutral in early July. And after the Cupertino (Calif.) Mac maker announced a surprisingly strong third quarter on July 16, Hillmeyer conceded that Apple had caught a little more momentum,” reports BusinessWeek Online’s Peter Burrows.
Burrows reports, “After seeing the quarterly numbers, Hillmeyer now looks for Jobs & Co. to bring in $6.75 billion in sales in fiscal 2004, vs. a projected $6.14 billion in the year that ends this September — and up 10% from his previous forecast. Hillmeyer also has boosted his earnings-per-share projection for fiscal 2004 by 16%, to 32 cents. ‘If demand picks up more than people are expecting, there’s a lot of leverage in Apple’s model,’ he says.”
“While sales in Apple’s chain of stylish retail stores are up 100% over the past year, they’re still bringing in just 5% of total revenues — not enough to prevent an overall decline in total units sold. So despite Apple’s “Switcher” ad campaign, aimed at winning converts from the Windows world, not enough consumers are making the move to the Mac for it to gain overall market share. And the stores are still losing money,’ Burrows reports. “In fact, given its large investments in research and development and ts retail-store chain, Apple is just barely in the black on an operating basis. Its operating margins in June were just 0.6%. That’s the second profitable quarter in a row after two in the red — but hardly worth crowing about. And with the stock up 57% since the unveiling of the Music Store, investors have already factored in much of the good news.”
“Still, Apple’s roller-coaster story seems to have taken an upward turn. At the moment, even skeptics like Hillmeyer can’t ignore that,” Burrows writes.
Full article here.