Deutsche Bank Initiates Coverage of Apple With a ‘Buy’ Rating

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German banking and financial services company Deutsche Bank recently initiated coverage of Apple (NASDAQ:AAPL) with a “Buy” rating and a $650 price target. Deutsche Bank analyst Sherri Scribner outlined several reasons for her bullish assessment of Apple in a research note to investors obtained by StreetInsider, including the company’s “dominant position in smartphones and tablets where its products represent the gold standard in both categories.”

Scribner wrote: “iPhones and iPad represented 72% of Apple’s sales in 2013 and are central to the company’s performance. While growth is expected to decelerate in both markets, industry growth remains robust, with smartphones expected to grow units in the high teens for the foreseeable future and tablets expected to grow in the mid-20%s. We expect iPhones and iPads to be the key growth driver for Apple over the next year, with further upside in iPhones coming from a larger screen sized phone and further penetration in emerging markets.”

Scribner also mentioned several potential new product categories, although she did not include them in her current assessment of the Cupertino, California-based company.

“While our model does not currently include the benefit of a new product introduction, we believe Apple still has the ability to ‘surprise and delight’ its customers, therefore any new and successful product would provide upside to the company’s already above-market growth rates,” Scribner said, according to Barron’s. Some of the products cited by Scribner that could “surprise and delight” Apple customers included a smartwatch, Apple television, and various “connected” home products, similar to the devices made by Nest, a company recently acquired by Google (NASDAQ:GOOG).

Several prominent analysts have predicted that an Apple smartwatch, or “iWatch,” will be released this year. According to a recent research note from well-connected KGI Securities analyst Ming-Chi Kuo via 9to5Mac, Apple will release an iWatch in two different sizes and price ranges in the third quarter of 2014. Meanwhile, rumors of an Apple television, or “iTV,” were reignited when IBK Securities analyst Lee Seung-woo told The Korea Herald that an unnamed Korea-based display maker is already manufacturing sample OLED (organic light-emitting diode) display panels for Apple’s iTV.

Like many analysts with bullish views on Apple, Scribner cited the iPhone maker’s relatively cheap valuation in comparison to its peers. “With revenue growing faster than the market, despite the company’s large market cap, we believe shares should trade in line with market multiples,” wrote the Deutsche Bank analyst in a note seen by Barron’s. “Trading below market multiples at 11x our FY-15E, we view [Apple] shares as attractive.”

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