Edible Apple

Perhaps speaking to the power wielded by analysts, UBS tech analyst Steve Milunovich recently reiterated his “Buy” rating on Apple shares, while also mentioning that Apple may stand to learn something from IBM to the extent that Big Blue will meet with analysts and clue them in as to what’s coming down the pipeline.

IBM was one of the early vendors to deal with maturity and make a strength of it by consistently giving back up to 80% of its free cash flow to investors. Intel, Cisco, and more recently Dell and TI have made strong commitments to returning cash. We believe Apple needs to do the same and, from all signs, is likely to meaningfully boost cash return in the next few months, most likely through buybacks. Increased transparency the next step In 2005 IBM was telling the Street it could grow earnings double-digit, but the company was so complicated that analysts didn’t believe it. IBM’s earnings roadmap has been a great success in increasing understanding of the company. In its own way, Apple needs to be more transparent, perhaps beginning with an analyst meeting. Without pre-announcing products, management should be able to outline how it thinks, highlight strengths, and showcase management depth.

Apple continues to make money hand over fist, and yet their P/E ration is shockingly low. We’ve all seen how much influence un-sourced reports out of Asia can have, so maybe this isn’t such a bad idea after all. I know Apple doesn’t like to pander to short term AAPL observers, but with shares of Apple in the gutter and its earnings multiple under 10, it’s not the worst idea we’ve come across.

via Barrons