Strong Apple products in the pipeline — and a possible dividend — led one “Fast Money” analyst to predict the company had a lot more upside in 2012.
“I definitely think a dividend is going to happen in calendar ’12,” ISI analyst Brian Marshall said Tuesday, adding that most investors don’t expect one.
Apple last paid a cash dividend on its common stock in December 1995.
“They could do a dividend of, say, 250 basis point-yield and only pay out 20, 25 percent of their free cash flow,” he said. “They’ve got tremendous flexibility here, obviously, and we think that would drive an incremental $4 billion of buying power to the stock, which is essentially the equivalent of a Top 10 holder. We think a dividend would be a material catalyst for the stock.”
Shares of Apple traded upward of $409 midday, up more than 1 percent.
“They still have tremendous opportunity to grow,” he said.
Marshall, who had a $500 price target on the stock, said he expected launch of the iPad 3 in March and Apple TV in 2013, based on a three-year product cycle.
Marshall said the Apple TV will likely be a standalone flatscreen television set with an Apple interface, or “the first product to seamlessly integrate the home office and the living room.”
Trader Brian Kelly liked it.
“The trade is to buy,” he said. “There was no hot stock or hot toy this year during the holiday season. It was the iPad, it was the iPhone, it was the (iPod Touch). They have it. People line up at the stores to buy their product. You keep buying it.”
What’s On Deck for Cisco?
Marshall increased Cisco’s price target on improved performance since the company reset expectations in August and maintained a “buy” rating on the stock.
“It was like a coiled spring,” he said.
Federal spending was expected to increase in FY 2012. Marshall also liked Cisco’s positioning within the sector.
“Clearly data traffic is only going to grow 50 to 100 percent per year,” he said. “With their incumbency there, we still like Cisco here. We see another 20 percent upside to $22 in our view.”
OptionMonster cofounder and “Fast Money” pro Jon Najarian said he “loved” the stock, calling the company “one of the biggest cloud plays” in the space.
Trader Joe Terranova noted that institutional ownership moved out of Cisco stock and into Juniper after disappointing earnings results in August but said he was an owner and expected growth on increased government spending.
New Leadership at IBM
Marshall said IBM’s transfer of leadership to new CEO Virginia Rometty would be seamless.
“I don’t want to say the company runs itself, but it’s got great operations,” he said.
But at a valuation of 13 times earnings and roughly 80 percent of earnings coming from share repurchases, Marshall said the stock did not have a lot of upside left.
Marshall maintained a “neutral” rating on IBM and a price target of $32 per share.
“We’re going to look for something with a little more secular growth in our view.”
Najarian sounded positive on the new CEO coming from within its ranks.
“I don’t think there’s a single thing not to like about the IBM strategy,” he said, calling it a similar story to what happened at Apple. “It speaks to the depth both of these two companies have.”
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Trader disclosure: On Jan. 3, 2012, the following stocks and commodities mentioned or intended to be mentioned on CNBC’s "Fast Money" were owned by the "Fast Money" traders: Terranova is long (VRTS); Terranova is long (IBM); Terranova is long (LQD); Terranova is long (MUB); Terranova is long (EMC); Terranova is long (CSCO); Terranova is long (AXP); Terranova is long (SBUX); Terranova is long (CSX); Terranova is long (APC); Terranova is long (XOM); Terranova is long (TRLG); Terranova is long (TRLG); Terranova is long (SWN); Terranova is long (V); Terranova is long (SU); Najarian is long (CIGX); Najarian is long (CME); Najarian is long (CBOE); Najarian is long (ANR) call spreads; Najarian is long (AAPL) call spreads; Najarian is long (CNX) call spreads; Najarian is long (CSCO) call spreads; Najarian is long (ACI) call spreads; Najarian is long (GS) call spreads; Najarian is long (RES) call spreads; Najarian is long (DVN) call spreads; Najarian is long (RIMM) call spreads; Najarian is long (MDR) call spreads; Najarian is long (LULU) call spreads
For Brian Kelly of Shelter Harbor Capital
Kelly is long (IWM)
For Mark Fisher of MBF Clearing Corp
* No disclosures
For Dan Dicker of Mercbloc, LLC President
Long Oil futures
For Andrew Burkly of Brown Brothers Harriman
BBH does not act as underwriter, market maker or maintain a proprietary trading book, but it may beneficially own securities covered in this material through various investment funds for which it serves as investment manager and/or sponsor. BBH’s partners and employees may own securities covered in this material and/or may make purchases or sales while this material is in circulation. BBH and its affiliates provide investment banking services, investment management and advisory services, securities brokerage services, and non-securities services. The reader should assume that BBH and its affiliates receive compensation for such services. BBH does not compensate its research professionals based on investment banking transactions. The research professional(s) responsible for preparing this material receive compensation based upon various factors including BBH’s total revenues, a portion of which is generated by investment banking
For Brian Marshall of ISI Group
DISCLOSURE: Neither ISI nor its affiliates beneficially own 1% or more of any class of common equity securities of the subject companies referenced in this Report. No person(s) responsible for preparing this report or a member of his/her household serve as an officer, director or advisory board member of any of the subject companies. Neither ISI nor its affiliates have any investment banking or market making operations. At various times these reports mention clients of ISI from whom ISI has received non-investment banking securities related compensation in the past 12 months.
For Dennis Gartman of The Gartman Letter
Long Canadian dollar, aussie dollar, Long Soybeans
Short Euro, and Japanese Yen
For Rebecca Patterson of JP Morgan Asset Management
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