CHICAGO, June 27, 2011 /PRNewswire/ -- Zacks.com announces
the list of stocks featured in the Analyst Blog. Every day the
Zacks Equity Research analysts discuss the latest news and events
impacting stocks and the financial markets. Stocks recently
featured in the blog include: Motorola Mobility (NYSE: MMI),
Apple (Nasdaq: AAPL), ExxonMobil Corp. (NYSE: XOM),
Chevron Corp (NYSE: CVX), and Schlumberger Ltd.
(NYSE: SLB)
(Logo: http://photos.prnewswire.com/prnh/20101027/ZIRLOGO)
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Here are highlights from Friday's Analyst Blog:
Apple Empire in Danger?
"What are Apple's vulnerabilities?" This was the question posed
to Sanjay Jha, CEO of Motorola
Mobility (NYSE: MMI) this week by Fortune's Geoff Colvin, Senior Editor-At-Large, on
CNNMoney. Jha first praised and admired the success of Apple
(Nasdaq: AAPL) in delivering world-class products. Then he spoke
broadly about the challenges of any giant tech success, saying that
"scale and innovation very often don't mix."
He explained this decline-and-fall thesis by focusing on what
tends to happen when a company is faced with defending its large
market share and its competitive advantages. "Defensive actions
very often set in and middle management begins to drive the culture
and strategy of a company. Not speaking about Apple in particular,
but with the scale that comes with that level of success, very
often is in itself the beginning of a decline sometimes."
Must-Have Gadget Magic
I have been a huge fan of Apple the company, its products, and
the stock for a few years now because of their ability to produce
what I call "must-have gadget magic" and productivity tools. In
2009, I counted the iPods around my house and observed the numbers
of my friends and associates in love with their iPhones. The appeal
of the products is over-the-top emotional for many adults, to say
nothing of easily-spoiled teens.
Then I fell in love with my first Apple smartphone last year.
Now I wonder "How many iPhone users could live without their device
for even a day?" Not many that I know, myself included.
And I bought a MacBook Pro laptop last year because I test-drove
one and liked it so much better than any of several Dell products I
had used for the previous ten years. I'm not ready to get an Apple
desktop yet, but I can definitely see the appeal for anyone doing
any sort of multi-media production.
The interesting dynamic here to consider is something I've been
talking about for a couple of weeks now. From my June 3 article "How Dow 20K?" where I wrote
"Apple's biggest victories may be on the horizon as consumers who
keep moving up the product cycle -- from iPod, to iPhone, to
MacBook, as I just did -- will be more likely to buy an Apple
desktop next. With single digit desktop market share now, imagine
the possibilities for the company's revenue and earnings if they
double their penetration."
Must... Have... Numbers
Aside from my anecdotal "research" on Apple products and market
success, the really important questions are, "What is the earnings
picture now and will institutional investors continue to accumulate
shares because their valuation models tell them so?"
Zacks Consensus earnings estimates are $24.79 for this year and $28.76 for 2012. These are conservative numbers,
especially since Apple has a nice history of positive surprises.
The Zacks "Most Recent Consensus" numbers are $25.26 and $30.99
for this year and next, respectively. And these aren't even the
highest estimates by some analysts of over $26 and $33.
So you have to ask, "Will the company continue to surprise with
impressive sales and product innovation-appeal?" If so, the higher
numbers are not far-fetched even with a mildly-slowing economy in
view. If Apple is on trend to hit $30
in 2012, that means it's trading at 11 times forward estimates.
A forward P/E multiple of 11 is ridiculously cheap for this
monster of tech. And that means growth fund managers will continue
to accumulate the stock in the low $300's. Yes, institutions seem full to the gills
with AAPL stock. But I don't think the party is over. Given its
potential to surprise and innovate, there is more risk for them to
not owning Apple than owning it.
Digital Hub of Your Life
Maybe you are not a fan of Apple products or the stock. And
maybe you agree with Motorola's Jha that the emperor could be found
naked some day. But I leave you with this observation by the
once-dominant handset maker's CEO: the smartphone is more important
than the tablet. This would seem to argue for the demise of iPads
and the like.
But I suspect it only helps Apple. While they will continue to
own the tablet market as surgeons and pilots find "must-have" uses
for iPads in cockpits and operation rooms, the fact they can
innovate like that will only feed their development of better
smartphones.
Jha thinks the phone will always be the ultimate device for
consumers and business people because it is the one we carry with
us at all times. It is the "digital hub" of people's lives as he
calls it. And therefore he believes that the biggest opportunities
in his industry are the "convergent capabilities" of computing and
communications in a single, handheld device.
I think Apple will continue to grow its market share and its
dominance in that environment. Assuming leadership doesn't get
complacent or defensive, that is.
Reserve Oil to Ease Prices?
In a surprise move, U.S. and its allies in the Paris-based International Energy Agency
("IEA") – the energy-monitoring body of 28 industrialized countries
– have announced the release of 60 million barrels of emergency
crude supplies from government-held strategic reserves into the
world market over the next 30 days.
Of the total volume, half (or 30 million barrels) will come from
the U.S. Strategic Petroleum Reserve ("SPR") – the largest release
ever from the nation's huge 727 million barrel emergency stockpile
– with Europe accounting for 30%
and the Pacific OECD nations supplying the remainder.
As per the plan, IEA, which represents the bulk of the world's
largest energy consuming nations, will release 2 million barrels a
day starting next week and stretching over a month, mainly to
alleviate the loss of crude exports created by the unrest in
Libya and other oil-rich nations
in the Middle East.
In particular, the U.S. and IEA officials point out that
turbulence in Libya has taken off
140 million barrels from the market year-to-date, most of that
being high-quality oil that is easiest to refine and convert to
gasoline. This, they say, have raised prices and slowed the
economic recovery in the U.S. and abroad.
The proponents of the move argue that, if successful, it could
bring down the price of fuel and jolt the stalling recovery by
acting as a type of economic stimulus through increased consumer
spending that has seen pressure for much of this year with crude
prices jumping above $110 a
barrel.
The emergency crude supply release comes with the onset of the
summer driving season, usually the period of peak petroleum
consumption and one in which high-quality crude oil like
Libya's is particularly in
demand.
Additionally, the administration's action is aimed at countering
the Organization of the Petroleum Exporting Countries' (OPEC)
refusal to boost its production quotas and apprehensions regarding
a new surge in gas prices.
However, some analysts are skeptical about the impact of the
oil-reserve release on prices, arguing that it is most likely to be
short-lived. They went on to say that the 60 million barrel
drawdown amounts to less than one day of global oil demand,
currently close to 87 million barrels per day.
With commercial crude supply levels in the U.S. already above
the upper limit of the average for this time of the year and oil
prices headed lower due to economic weakness in the world's biggest
oil consumer, the proposed move will do little to benefit
consumers, stressed these analysts.
But, unsurprisingly, the announcement that the consuming nations
would tap emergency reserves drove down crude oil prices by nearly
5% to around $91 per barrel, a
four-month low. As a result, the share prices of oil-weighted
majors like ExxonMobil Corp. (NYSE: XOM), Chevron
Corp (NYSE: CVX), and Schlumberger Ltd. (NYSE: SLB) also
tumbled.
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