Bernstein Research Rates Apple as ‘Outperform’

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Bernstein Research analyst Toni Sacconaghi has selected Apple (NASDAQ:AAPL) as one of his top information technology hardware company picks. According to a research note obtained by Barron’s, the analyst gave Apple an “Outperform” rating. Sacconaghi also featured Hewlett-Packard (NYSE:HPQ) as a top pick and rated it as “Outperform.”

However, the analyst also noted that the California-based company was an underperformer in 2013, like many other IT hardware stocks. “We note that many mega-cap traditional technology vendors underperformed in 2013,” wrote the Bernstein Research analyst in a note seen by Barron’s. “In addition to International Business Machines (NYSE:IBM), Apple, EMC (NYSE:EMC), Oracle (NASDAQ:ORCL) underperformed by 15 percent, Cisco Systems (NASDAQ:CSCO) by 15 percent and Accenture (NYSE:ACN) by 6 percent.”

“Large cap technology valuations remain in their lowest decile vs. history on both a cap weighted and equal weighted basis, although they have rebounded slightly from historic 35-year lows reached in June 2013,” wrote Sacconaghi via Barron’s. “Low-growth tech stocks materially outperformed high-growth tech stocks in 2013, and the valuation delta between the two is now in line with historical averages.”

Despite his endorsement of Apple and Hewlett-Packard, Sacconaghi outlined low expectations in his overall outlook on IT stocks this year. “Our November 2013 CIO survey points to a continued weak spending environment, which is consistent with poor global GDP growth and flat global corporate earnings growth — historically, both of these metrics have been correlated with IT spending growth,” wrote Sacconaghi according to Barron’s. “Given this backdrop, we forecast IT spending growth of 2-4 percent in 2014, similar to IT spending growth in both 2012 and 2013E (2-3 percent).”

Sacconaghi wasn’t the only prominent analyst to call attention to Apple this year. In his first research note of the year, Cantor Fitzgerald analyst Brian White called Apple “our top large-cap pick in our coverage universe for 2014.”

While Sacconaghi noted the historically low valuations on IT hardware stocks, Cantor Fitzgerald’s White cited Apple’s upcoming “new product innovations.” White believes Apple will release the long-rumored iWatch in 2014, as well as two larger iPhone screen sizes.

Here’s how Apple traded today.


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