Thomas Weisel Partners upgraded Apple Inc. Monday, saying the company’s current share price severely discounts long-term growth potential.
The firm also said the risk that 2008 results will disappoint has faded.
Analyst Doug Reid moved his rating to “Overweight” from “Market Perform” and raised his price target to $195 from $188. The new target implies he expects shares to rise about 27 percent over Friday’s $153.08 close.
“Over the next few years, we expect Apple to maintain above-peer operating margins, preserve its fierce brand loyalty and set a foundation for accelerating market share gains,” Reid said in a note to clients.
Apple will likely report a 24 percent compound annual revenue growth rate over the next five years, based on market share gains for its Mac computer business, geographic expansion of its iPhone line and continued success in “defining and dominating new media-centric consumer product categories” such as iTunes and Apple TV, he said.
While Wall Street has mostly kept estimates at the same level this year, Reid said that expectations for earnings outperformance have been replaced by achievable estimates. He raised his 2008 earnings forecast to $5.23 per share from $5.03 per share. Analysts polled by Thomson Financial expect, on average, earnings of $5.13 per share.
Shares of the Cupertino, Calif., company rose $2.42 to $155.50 in premarket trading Monday.
