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While the announcement of Steve Jobs' second medical leave of absence may have left some in the Apple world shaken, US analysts claim there's nothing to fear. US stock markets were closed today in observance of the holiday, so the effect of the announcement on Apple's stock has yet to be seen on Wall Street.
Traders on the Frankfurt DAX sent Apple shares downward 6 percent, eerily similar to the most recent time when Apple had announced that Jobs would be taking a leave of absence. However, analysts felt more confident in Apple's strength this time around.
"With Steve Jobs as arguably the most iconic CEO in the world and widely recognized as the 'heart and soul' of Apple, we expect the stock to come under heavy selling pressure on Tuesday," notes Brian White, a senior research analyst with Ticonderoga.
"If the stock goes into a significant downturn in the coming weeks on this news and/or further developments in the future," White continues, "we believe Apple would be wise to tap into its $51 billion net cash position (as of the end of FY10; we estimate $70.8 billion by the end of FY11) for a significant stock repurchase or a generous cash divided."
White goes on, "Steve Jobs' health issues have long been a risk to the Apple story (e.g., and listed as a risk to our price target), and we believe one of the reasons the stock still only trades at just 15x (ex-cash) our CY11 EPS estimate, despite rapid growth and arguably the best product cycle in the tech world."
"Additionally, Steve Jobs deeply cares about his employees and the future of Apple; thus, we believe he has been building a strong team that is able to successfully lead Apple into the future. Finally Tim Cook's performance during Steve Jobs' medical leave in 2009 was excellent, highlighting Apple's strong bench."
With that, Ticonderoga is still maintaining a buy rating, with a price target of $450. The current price tag is at $348.
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(Image courtesy of techdigest.tv)