Apple Cut at Bear Stearns

The 133% run-up in shares of Apple(AAPL Quote) had Wall Street biting its nails Wednesday.

Bear Stearns cut its investment rating on the stock to peer perform from outperform, citing "a declining risk/reward profile." At Tuesday's close of $74.98, the brokerage said, Apple is currently trading about 7% above its opinion of 2006 fair value of $70, or 24 times its calendar 2007 earnings estimate of $2.45 a share plus cash.

Bear Stearns estimates that Apple is selling at a "75% premium to the market" based on its expected 2006 operating earnings, a multiple that is consistent with that afforded to other high-growth companies like Cisco(CSCO Quote) and Microsoft(MSFT Quote) during similar periods in their history. But given the run-up in the stock, there may be better bets.

"Despite strong momentum from iPod and several near-term catalysts ahead, we are lowering our rating on Apple from outperform to peer perform owing to valuation that reflects much of the near-term optimism," Bear wrote.

The stock fell $2.25, or 3%, to $72.73 early Wednesday.

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