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UBS again praises Cook, urges investors to 'buy in' to AAPL for fall

updated 07:00 pm EDT, Wed July 30, 2014

Analyst talks of iOS 'everywhere,' Cook's bold strategies

Six weeks after it rebutted a New York Times editorial that cast doubt on Apple's CEO, investment firm UBS has again praised Tim Cook's vision and leadership of Apple in a note to clients. In particular, analyst Steven Milunovich was taken with Cook's plans to expand iOS to automotive, gym, medical and home markets through its CarPlay, HealthKit and HomeKit initiatives, as well as the continuing growth of the entire OS X and iOS eco-systems, which the company refers to as "the Applesphere."



First noted by AppleInsider, Milunovich's memo compliments Cook by saying he "thinks big" and notes his commentary from the recent quarterly conference call that the company "has a very large vision" for iOS expansion, even going beyond the long-anticipated "iWatch" wearable health device. UBS currently offers one of the more optimistic price targets for Apple stock, calling for $115 per share over the next year, well above the company's all-time high price.

Milunovich expects that gross margins for the company will continue to stay strong, even as it adds additional products to its lineup going into 2015. He notes that Apple has managed the neat trick of being both a leading and influential tech company while simultaneously being "a luxury consumer franchise or lifestyle brand," something none of its competitors can claim. Apple's margins and product mix, the main source of Milunovich's enthusiasm, are routinely well above the industry average both in sales and profits, and has created an "Applesphere," a "mega-ecosystem that has grown 10x stronger in the last few years."

In a previous note, Milunovich had referred to Cook as "the right man for the time," meaning that Jobs chose him as a successor because of Cook's skills in areas that Apple has grown into since becoming the world's most valuable publicly-traded corporation. The company has changed tremendously from when Jobs retook the CEO position in the late 90s, leading the Mac maker from being a niche player to influential market powerhouse in every category it competes in.

Jobs himself oversaw the shift from the creative-led management team he brought with him from NeXT - that was focused on innovation alone as a means to rescue the company - to a more balanced approach that valued operations and customer experience as highly (or more so) as an endless stream of new shiny objects. He reiterated the same tone he gave his clients in his June memo, standing by his target pricing and saying that he believes Apple remains focused on making great products, even to the exclusion of a quick return on investment, which he sees as a path to "remarkable new market innovation success."

Milunovich singled out the forthcoming "Continuity" feature of iOS 8 and OS X 10.10 Yosemite that allows users to more easily transition from one device to another as changes in workflow or needs demand as part of Cook's vision for the company. He also noted Apple's growing success as the progenitor of the "iBeacon" indoor GPS technology, which clients such as the Hudson's Bay Company have called "the future of retail marketing." Like other analysts, Milunovich also sees a greater leveraging of Apple TV technology in the future, and great potential in CarPlay and the company's health and home automation initiatives.

He urges investors to stay with the stock through the fall, which is expected to debut a number of refreshed and all-new products, including new models of iPhone, iPad, and likely at least one debut product or service, such as the "iWatch" -- which has great potential to be a hot seller during the holidays on top of expected demand for its iOS revamps, pushing significant new growth. Apple also appears to be in the process of refreshing its Mac lineup, with the recently-upgraded MacBook Pro line and leaks revealing refreshed Mac mini and iMac configurations.




by MacNN Staff

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Comments

  1. climacs

    Dedicated MacNNer

    Joined: 09-06-01

    yes, SOMEBODY gets it. People who dissed Cook thinking that he was not Jobs 2.0 completely missed the plot. It could even be said that Jobs' passing was a good thing for Apple as it transitioned from a plucky comeback story to king of the hill.

  1. msuper69

    Professional Poster

    Joined: 01-16-00

    @Climacs: I was going to post your first sentence.
    Finally! Someone who gets it.
    Great minds think alike sometimes.

  1. iphonerulez

    Dedicated MacNNer

    Joined: 11-28-08

    I'm willing to bet institutional ownership of Apple does not go up significantly. There's something about Apple stock that doesn't particularly interest institutions like they're interested in Google, Microsoft, H-P or even Netflix. For a relatively successful tech company, Apple doesn't seem to attract the institutions. Maybe because Apple's current financial success hasn't been for that long or the smartphone business is too volatile. Apple's been stuck at around 62% ownership for the past couple of years.

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