Shares in Apple Computer Inc fell 12.4% Tuesday after the company warned of a fourth-quarter shortfall in revenue and earnings. Apple shed $9.8125 to close at $69.25 after it revealed that a supply shortage in chips from Motorola Inc would severely hinder shipments of the company’s new G4 PowerMac computers.
But Warburg Dillon Read analyst Charlie Wolf wasn’t fazed by the negative announcement, saying We would see a pull back in Apple’s share price as a buying opportunity. While lowering his estimates for the quarter and year to bring them in line with the new company guidance, Wolf maintained his buy rating on Apple stock and price target of $90. Apple’s only mistake was to introduce the G4 before it had a clearer sense of Motorola’s ability to ramp up production of the G4 processor, Wolf said.
In a research report issued Tuesday, the analyst pointed out that the shortage of supply is a clear reversal of the company’s past problems and the resulting backlog keeps near-term prospects rosy. Despite the 150,000 G4 orders Apple received during the quarter, the company will only ship about 75,000 to 80,000, Wolf estimates.
But Wolf is confident that the current supply problems won’t translate into lost sales. The good news is that G4 backlog is a solid one, since the customer base – the design and publishing market – is Mac-centric and will likely wait rather than switch to a Windows machine, he said. If anything, demand for the G4 is likely to prove stronger than we had anticipated because of the product’s superior price/performance.
