By Philip Elmer-DeWitt
January 6, 2009

Oppenheimer & Co.’s Yair Reiner turned heads on Wall Street three weeks ago — in the wake of Apple’s surprise announcement that Steve Jobs would be skipping Macworld 2009 — when the analyst downgraded the company and refused to set a price target for its shares until he got some answers. (See Analyst sounds warning.)

On Tuesday, Reiner reinstated Apple (AAPL), upgrading the stock to “outperform” and setting a 12 – 18 month price target of $135 a share. (The stock closed Monday at $94.58, up 4.22% for the day.)

But in a long note to clients, Reiner made it clear that while Jobs’ open letter Monday offered some reassurance, he remains skeptical.

“We don’t know what ails Apple’s CEO, and we’re not ready to assume that a problem with a ‘relatively simple and straightforward’ remedy is a problem that is itself ‘simple and straightforward.’ Still, it seems unlikely that Jobs, the board, and its counsel would disclose the prognosis of a six-month recovery if it were at odds with doctors’ expectations.”

Reiner describes Jobs’ note — and the board’s accompanying statement — as an “attempt to balance the protection of Jobs’ privacy with the board’s fiduciary responsibility to disclose significant risk factors to the company.”

Apple’s lawyers must have vetted the letters with care, he says, so it’s incumbent on investors “to parse the missives with equal care.”

In Reiner’s parsing, the letters say that the board considers the risk to Jobs’ health to be “grave” — or in SEC parlance, “material” — although Jobs leaves the strong impression that the most likely outcome is a return to relatively normal health.

At the least, Reiner writes, the prognosis of a six-month recovery buys Apple some time. “‘The Apple community’ is now due an update in late spring, but until then the recovery will be allowed to run its course without undue prying.”

Meanwhile, however, Reiner has a long list of things we still don’t know, among them:

  • Whether Jobs is currently engaging in his normal CEO duties
  • What suddenly prompted him to seek out the root cause of his condition a few weeks ago
  • What the long-term prognosis of his condition is.

In short, Reiner concludes, the leadership risk has not gone away, but it has become less acute, allowing investors to refocus on what he calls the heart of the Apple story:

  • The Mac share gains
  • The iPhone revolution
  • The cash in the bank
  • And the cash that’s still flowing.

For more on Jobs’ medical condition, see What’s going on with Steve Jobs’ hormones

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