Let’s take a look at analysts’ morning notes:
- Apple (AAPL): Overweight. It beat fourth quarter consensus revenue and earnings-per-share by 10% and 20% respectively. Apple shipped 16.2 million iPhones in the quarter and continues to face supply shortfalls ahead of the Verizon launch. Although Apple commonly enters long-term supply agreements with various suppliers, the formal announcement of $3.9 billion in long-term supply agreements points to confidence in the demand outlook.
- Dollar Tree (DLTR): Upgraded to overweight. We believe the dollar store industry is experiencing secular growth and that the market is still under-appreciating the long-term and near-term growth potential of Dollar Tree. It is the cheapest dollar store in our coverage universe, despite the strongest sales outlook, highest square footage growth and highest Return on Net Operating Assets.
- Apple (AAPL): Buy. It’s reported revenues of $26.7 billion and earnings-per-share of $6.43 beat expectation. We believe it’s attractive margin profile will be sustained by multiple factors including the Verizon iPhone (available early February).
- IBM (IBM): Buy. It posted earnings-per-share of $4.18 on revenues of $29.0 billion which beat expectations reflecting strength across all major business segments. We expect improving enterprise spending, strong backlog growth and strengthening product cycles to drive solid growth in 2011.
- Mosaic (MOS): Buy. Cargill has agreed to gradually wind down its 64% stake in the company. The exit of the majority shareholder is a long-term positive in our view, as it provides Mosaic with the freedom to grow the business and potentially opens the door for important, long-term M&A activity. However, we do not see a buyer emerging in the near-term as Mosaic and Cargill undertaker a lengthy and complicated divestiture process which could result in some volatility in the near future.
- Comerica (CMA): Hold. The stock fell 8% today after announcing plans to buy Sterling Bancshares and offering a 2011 outlook that underwhelmed expectations. Due to selloff, we are raising our rating from sell to hold on valuation, maintaining our $40 target price and reducing risk rating from high to medium also on valuation and its capital strength versus its competitors.
- Cott Corp (COT): Downgrading from overweight to equalweight. The stock now appears more fairly valued, we recently lowered our earnings-per-share outlook closer to consensus, commodity input cost inflation remains a risk, and Cott Corp has limited relative pricing power. While the shares do not appear to be overly expensive, we believe investors have an opportunity to take advantage of the stock’s strength.
- Charles Schwab (SCHW): Maintain buy. It delivered a solid finish to 2010 yesterday. While fourth quarter earnings-per-share data was slightly below our estimates, core metrics improved across the board. Recent improvements in the rate environment helped with interest revenue and will help the company in 2011.
- Apple (AAPL): Overweight and it is one of our top picks for 2011. While the news of CEO Steve Jobs taking another medical leave could inject some uncertainty into Apple shares, we believe that the strong print-and-guide should begin to refocus investors on Apple’s unrivalled growth story and its staying power. Our recommended homework for investors is to focus on Apple’s ability to return gross margins to the 39-40% threshold over time. Investors should also evaluate the power of Apple’s early lead in the tablet market compared to the offerings coming later this year. Expected iPhone momentum at Verizon will be an important topic, as well as Apple’s goals to make a dent in the PC market internationally which we believe is just getting started.
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