Apple Inc. (NASDAQ:AAPL) should not be scared of Samsung Electronics Co., Ltd. (LON:BC94) (KRX:005930) and the Galaxy S4 is a dud. Morgan Stanley (NYSE:MS) states that belief in an email sent to institutional clients this morning. The subject of the email is ‘AAPL – Samsung S4 launch a dud, #’s bottoming, cash coming…’ The email from Morgan Stanley is below:
While it hasn’t been easy or popular to be bullish on Apple Inc. (NASDAQ:AAPL) of late, we think the time has come to buy the stock. As a growth story, the best you can hope for is that AAPL maintains its share in a smartphone/tablet market with slowing growth rates. To be viewed as a growth name again, they will have to find a way to bring back some innovation. As a cash return/value story however, we are getting close. 2 things value investors need to see are a higher dividend/buyback and estimates stabilizing.Khrom Capital killed it during the first quarter, continuing its strong track record; here are their favorite stocks
Khrom Capital was up 32.5% gross and 24.5% net for the first quarter, outperforming the Russell 2000's 21.2% gain and the S&P 500's 6.2% increase. The fund has an annualized return of 21.6% gross and 16.5% net since inception. The total gross return since inception is 1,194%. Q1 2021 hedge fund letters, conferences and more Read More
1. Cash return. While its anybody’s guess what Apple Inc. (NASDAQ:AAPL) intends to do with its cash hoard, shareholder outcry has never been louder, and my guess is that it will be something significant. INTC has a 4% yield, Microsoft Corporation (NASDAQ:MSFT) 3.2%, yet AAPL has just a 2.5% yield. Apple Inc. (NASDAQ:AAPL) has underperformed Intel Corporation (NASDAQ:INTC) and MSFT by 23% this year. Value guys may not plow into AAPL, but my view, a rotation is long overdue.
2. Numbers bottoming. You’ve had >20 number cuts over the past 60 days. While Apple Inc. (NASDAQ:AAPL) is one of the most widely tracked stock (bloomberg shows 63 banks covering), the 20 PT/estimate cuts basically covers all bulge bracket firms. They’ll need to report and guide before anyone has real confidence that #s have bottomed, but for now it seems like estimates have been lowered enough to reflect and price in the weak checks that we’ve all been hearing about.
3. Samsung: Least importantly, but a catalyst for today, Samsung Electronics Co., Ltd. (LON:BC94) (KRX:005930)’s Galaxy S4 launch doesn’t seem like much of a competitive threat to Apple Inc. (NASDAQ:AAPL). The reviews are in, the product is not revolutionary, and will not spark any type of share shift. Samsung’s event last night was essentially entertaining (actually, it was odd) to watch but the device disappointed on form factor, which is key.