I'm not going to list all 58 here, but I will dig in a bit on the first name on Piper's list: suddenly beleaguered Apple, which is labeled as the firm's top Internet sector pick for 2013.
Piper analyst Gene Munster has long been one of the more vocal bulls on the stock, and that isn't changing: he's sticking to his Overweight rating and $900 price target. And he thinks the stock is headed for a strong 2013.
"While questions about demand for Apple's new products and sustainability of margins have arisen over the past 3-6 months, we believe 2013 will be a year of Apple delivering on or exceeding expectations," Munster writes. "Additionally, we believe investors that exited AAPL to avoid a potential tax increase could return to the stock given the valuation. As a result, we expect the company to eventually get a multiple in excess of the S&P 500 (12.5x forward earnings) compared to 10.5x at current levels for AAPL. On the product side, we believe the company will introduce incremental improvements to core products in the iPhone and iPad, more significant improvements to software under Jony Ive's control, and ultimately a television."
Munster says the bottom line is that for Apple shares to work, investors need something to look forward to on the product side. "We believe a core reason the stock worked in early 2012 was expectations for the iPhone 5 as the stock started the year at ~$411 and peaked at ~$702 in September ahead of the iPhone launch (71% increase at the peak)," he notes. "In 2011, we believe the stock worked (from $323 to $422 at the peak, a 31% increase) due to anticipation of the next iPhone and iPad ramp. We are more optimistic about 2013 as we believe Apple will not only launch a television, but also a lower priced iPhone for pre-paid markets in 2014 or potentially sooner."
A few details on what he sees ahead:
- He thinks Apple unveils a TV late in 2013. Munster continues to expect screens in the 42-55 inch range, with pricing in the $1,500 to $2,00 range. "We expect the beauty of the design to be a feature, but the most important feature will be the ability to use the TV as the main interface for the living room across multiple devices. We believe the TV will include Siri and FaceTime. The biggest item unlikely to come with the TV will be unbundled channels."
- And he also thinks Apple is going to unveil lower-priced iPhone early in 2014. "In early CY14, we believe Apple may introduce an iPhone at ~$200 unsubsidized," he writes. "The $200 price is important given Apple's market share is weakest in emerging markets. We estimate that Apple controls 55% of smartphone sales in the U.S., and ... closer to 4% in emerging markets like China. The cheaper iPhone is why we are confident (despite lower ASPs) that Apple can accelerate iPhone sales to 29% year-over-year in CY14 from 26% in CY13 and 39% in CY12. Overall we believe iPhone global smartphone share will increase from ~20% in CY12 to 32% in CY15."
AAPL this morning has slipped $3.80, or 0.7%, to $530.10.
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