Thursday, April 23, 2009

Apple (NASDAQ:AAPL): Outperform from Underperform at RBC

RBC Capital is out upgrading Apple (NASDAQ:AAPL) to Outperform from Underperform while raising tgt to $165 from $95.

Firm notes their prior concerns these past months were: 1) Recession headwinds; 2) Margin downshifts; 3) Management uncertainty.

They now see these issues mitigated or resolved, leaving us more positive, based on: 1) turnaround in RBC's proprietary consumer demand survey; 2) improved margin visibility via product roadmap; 3) stronger resiliency, gains for Global Smartphones; 4) Apple's "VIP" (Valuation Innovation Premium), a factor they underestimated, sustaining outperformance despite near-term challenges; 5) belief Steve Jobs' is likely to return to Apple.

Consumer Demand Turnaround. Following 2 years of declines, RBC/IQ Changewave data (2,700) shows 11% spending more on consumer electronics vs. 10% March, helping restore demand for Apple products.

Smartphone Resiliency. As shown by recent RIM/Apple quarterly results, Smartphones have proven recession-resistant; they are raising Smartphone forecast to 30% Y/Y growth CY09 (21% prior) and iPhone ests. to 28M (24M prior).

Improved Margin Visibility. RBC believes Apple won't produce a Netbook or iPhone Nano this year, addressing their 'margin downshift' concern. They are raising F09 EPS estimates to $5.57 ($5.06 prior) and F10 to $6.39 ($5.64 prior) based on 35%/34% F09/F10 GMs (33%/31% prior).

Notablecalls: I like RBC overall but they have run with the heard when it comes to AAPL over the past couple of years. They were high on the stock when it was at $200 and they bashed it when it was trading in the $80's.

So now they are positive again.

Sorry Mike and Mark, but you guys need to up the ante or soon nobody will be paying any attention to your calls.

No comments: