Apple jumps on analyst upgrades

2 min read

Apple Computer Corp (Nasdaq: AAPL) jumped as high as 11 percent Thursday after it got an upgrade from two analysts.

Shares in the computer maker had settled down by midday, up 7 3/16 to 94 3/8, or 8 percent. The company recently invested $200 million in Internet service provider EarthLink Network Inc. (Nasdaq: ELNK) and took a seat on its board of directors.

Morgan Stanley Dean Witter raised its rating on the stock from "neutral" to "outperform." Analyst Gillian Munson set $120 price target, and said the upgrade was based on valuation.

"We feel good about Apple's outlook," for the first quarter and 2000, she wrote in a report.

CS First Boston analyst Michael Kwatinetz raised Apple's first quarter 2000 earnings estimate to 91 cents a share from 88 cents a share, and reiterated his "buy" rating on the stock.

Kwatinetz said he is also increasing his revenue forecast to $2.05 billion from $1.99 billion and said there is further upside, as units appear to have been better than forecast. Annual revenue forecasts were also raised to $7.7 billion from $7.6 billion and fiscal 2000 earnings forecast to $3.25 a share from $3.20 a share.

Software margins are in the range of 80 percent to 90 percent and the OS9 (operating system), which was released in October, could contribute more than originally expected, Kwatinetz said. Apple's deal with EarthLink Network Inc. was also expected to improved profitability later in the year, especially on the gross margin side. Gross margins could benefit from strong software sales and lack of pricing pressure, he added.

Apple is expected to report earnings on Jan. 19. First Call consensus calls for a profit of 89 cents a share. ="">