Stock Picks: Apple, Harley, Morgan Stanley, Salesforce
Apple Inc.: Citgroup equity analyst Richard Gardner kept a buy rating on shares of Apple Inc. (AAPL) on Apr. 21. He raised a price target on the shares to $320 from $300.
On Apr. 20, Apple reported a 90% surge in second-quarter profit on demand for the iPhone and Macintosh personal computer. Net income in the second quarter, which ended March 27, rose to $3.07 billion, or $3.33 a share, from $1.62 billion, or $1.79, a year earlier. Sales gained 49 percent to $13.5 billion. That surpassed the expectations of analysts, who predicted profit of $2.46 a share on sales of $12 billion.
Sales this quarter will be as high as $13.4 billion, Apple said, topping the $13 billion anticipated by analysts. Apple said iPhone shipments doubled to 8.75 million. The company also sold 2.94 million Macs and 10.9 million iPods.
Gardner said in a note that he is "significantly" raising his earnings per share (EPS) EPS estimates on the company's "stunning" second-quarter results. He said the company's $3.33 EPS and $13.5 billion in revenue topped even the most bullish forecasts, driven by record iPhone sales.
The analyst said the fact that Apple delivered such significant upside before this year's product introductions and refreshes makes him "all the more confident" in his positive stance on the stock through year-end.
Gardner raised EPS estimates for fiscal 2010 (ending September) to $13.17 from $11.54, and for fiscal 2011 to $15.50 from $13.67.
Morgan Stanley: Standard & Poor's equity analyst Matthew Albrecht kept a hold opinion and $36 price target on shares of Morgan Stanley (MS) on Apr. 21.
On Apr. 21, Morgan Stanley, in its first profit report under Chief Executive Officer James Gorman, posted earnings that beat analysts' estimates as fixed-income trading revenue more than doubled from a year earlier.
First-quarter net income was $1.78 billion, or 99 cents a share, compared with a loss of $177 million, or 57 cents, in the first quarter of 2009, the New York-based company said in a statement. Earnings from continuing operations were $1.03 a share, including a 21-cent tax benefit, compared with the 57-cent average estimate of 24 analysts surveyed by Bloomberg.
In a posting on the S&P MarketScope service, Albrecht said the company's earnings from continuing operations of $1.03 per share beat his estimate of 58 cents, helped by a tax benefit of 21 cents per share. He noted that trading revenues offset lower investment banking fees than he had projected, while asset management and brokerage results continued to benefit from rising asset balances.
"Compensation also accrued at a lower rate than we expected," Albrecht wrote.
"We think investment banking results will improve as '10 progresses, along with capital markets activities," the analyst said. He raised a 2010 EPS estimate by 42 cents to $3.15.
Harley-Davidson Inc.: UBS Securities equity analyst Robin Farley kept a neutral rating on shares of Harley-Davidson Inc. (HOG) on Apr. 21. She raised a price target on the shares to $35.50 from $25.50.
Harley-Davidson Inc., the biggest U.S. motorcycle maker, announced first-quarter profit that beat analysts' estimates on Apr. 20. Income from continuing operations was $68.7 million, or 29 cents a share, the Milwaukee-based company said. Analysts expected earnings of 24 cents a share, based on 8 estimates compiled by Bloomberg.
In a note, Farley said that Harley-Davidson's first-quarter EPS from continuing operations of 29 cents compared with her estimate of 25 cents, though her estimate excluded around 10 cents of restructuring charges.
"However, we believe manufacturing mix pulled $0.12 of that upside from future quarters," she wrote. She said that production of the company's Sportster model was only 15.3% of the first-quarter product mix, vs. 22.5% one year earlier, because Sportster production was shut down during the 2009 fourth quarter, allowing dealers to clear out older model-year inventory. Farley said the Touring model was 42.1% of the first-quarter production mix, vs. 34.8% in the prior year.
Historically, Sportsters account for 20% to 24% of the annual product mix while Touring is closer to 26% to 35%, Farley said, noting that Sportster is the company's lowest-margin model.
Salesforce.com.: Janney Montgomery Scott analyst Sasa Zorovic reiterated a buy rating and $94 fair value estimate on shares of Salesforce.com (CRM) on Apr. 21.
On Apr. 21, Salesforce.com announced it had agreed to acquire Jigsaw, a privately held provider of business contact information, for $142 million in cash, for $142 million in cash.
In a note, Zorovic said Jigsaw, founded in 2003, has over 20 million contacts in its database. Zorovic said he expects increased investments in distribution, and integration between the two companies' products.
The analyst said he expects acquisitions to continue and Salesforce.com to emerge as "a consolidator in the growing cloud software space".