There is a lot of Money Madness surrounding Apple Inc. (NASDAQ:AAPL) and Bank of America Corp (NYSE:BAC) these days. But where does the smart money go?
In celebration of March Madness across the country, CNBC program “Squawk Box” put together a “bracket” of stocks to determine a “champion.” Wednesday, the program looked at two of the final four in a head-to-head battle where viewers hear from analysts about each of the stocks, then they vote on the stock they would choose in which to invest. Wednesday’s matchup featured Apple Inc. (NASDAQ:AAPL) taking on Bank of America Corp (NYSE:BAC). Analyzing the two stocks were Daniel Ernst of Hudson Square Research to talk Apple, and Todd Hagerman of Stern Agee spoke about Bank of America. Which would you consider?
“Apple, still, at the end of the day is a phenomenal company,” Ernst said. “Even after this ‘horrendous year’ that peple have thought they had, … they grew revenue by 60 percent and earnings by 45 percent. And the valuation is very reasonable at less than 10 times earnings with a 2.5 percent dividend yield. You’re basically getting paid to see if Apple will start innovating again. And we think there is still a lot of innovation left in Apple.”
When asked about his firm’s $700 target on Apple Inc. (NASDAQ:AAPL) stock, Ernst said, “When Apple traded at $700, it was at 16 times earnings, which is a par multiple with the S&P 500. And if you think Apple is a below-par company, then maybe you should trade here, but historically it has been an above-par company, so 16 times earnings, we think, is a very reasonable valuation.”
Next, it was Hagerman’s turn to sell up the virtues of Bank of America Corp (NYSE:BAC). He first commented on his firm’s $12 price target on the stock, which is just above the stock’s current trading level.
“We’re still neutral on the shares,” he said. “The stock more than doubled last year, and it’s up about 30 percent over the last 12 months, but you’re really in a transition in terms of the stock. There was a really big run up last year, really built up on both the repositioning of the balance sheet, strenghtening the core of the company … but a lot of the run, and where the stock is today, is predicated on the cost-savings program. That is the fundamental driver for 2013 and ’14. Investors have built in some pretty lofty expectations that this company will be making some big cost cuts over the next several quarters. But there is a lot of risk attached to that at this point.”
DISCLOSURE: I own no positions in any stock mentioned.
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