Goldman Sachs More Bullish on Apple (AAPL) Following Conference

February 13, 2013 8:57 AM EST
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Goldman Sachs said they came away from Tim Cook's presentation Tuesday at the Goldman Sachs Technology and Internet Conference most bullish on Apple (NASDAQ: AAPL).

The analyst noted Tim Cook discussed many topics that are top of mind for investors and was optimistic on growth prospects. He also appeared much more flexible in returning additional cash, they said.

On capital allocation, Mr. Cook noted the company will continue to heavily invest in R&D, new products, the supply chain and acquisitions. He also stressed that Apple is in a position to seriously consider returning additional cash to shareholders, though it will be thoughtful and deliberate. On Greenlight's preferred stock proposal Mr. Cook said the company will consider it. It was also clear that Prop 2 did not preclude the issuance of such a security, but rather just required a common shareholder vote.

On innovation, Mr. Cook noted that he has never been more bullish on innovation at Apple.

On new SKUs and price points, although Mr. didn't give an specific indication of new product plans "the company appeared much more flexible in its willingness to expand its product lines and covered price points, noting that the only thing Apple would never do is to make "a crappy product.""

On growth and share gains, Mr. Cook remained optimistic. "The smartphone market is projected to double in three years and the company believes that all mobile phones will eventually be smartphones. Meanwhile, the company noted that the iPhone is currently only available to 50% of subscribers in the world. In addition, the company continues to view its ecosystem as a key source of competitive differentiation, revealing that it has paid over $8 billion to developers to date." They also see see growth in iPad and noted the high usage of the iPad relative to other tablets.

"Overall, we believe the Mr. Cook showed the company is much more flexible than
previously thought in considering returning cash to shareholders as well as on the product
innovation front, which we believe is encouraging for the story after the recent sell off.

The firm reiterated its Conviction Buy List rating and price target of $660 on AAPL. "We view the company's sticky installed base as a baseline for valuation support, and in addition, we expect new products in coming months (including a refreshed iPhone, a new iPad, and a lower cost iPhone) to reinvigorate new user growth. We also believe Apple could move towards shorter product cycles, which would minimize the volatility we saw last year and add a key source of stabilization to the story."

For an analyst ratings summary and ratings history on Apple click here. For more ratings news on Apple click here.

Shares of Apple closed at $467.90 yesterday.

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