More in Store for Storage Firms in 2013
Credit Suisse likes Apple, EMC and Fusion-io as PC trends remain sluggish.
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Spending in the information-technology sector was impacted in 2013 with revenue growth of 3%. Our analysis of the macroeconomic and corporate spending environments, combined with our proprietary surveys, suggest that the IT industry (PCs, servers, storage, printing and services) will continue to see cyclically subdued growth of 3% in 2013.
We see continued sluggish trends in PCs and servers, with a more robust market in storage in the second half of 2013.
With continued strength of iPhone and iPad sales, we currently see calendar 2013 and 2013 earnings-per-share estimates of $44.88 and $60.19 for Apple (ticker: AAPL) (rated at Outperform, $750 price target). Given multiple growth drivers in the form of increasing share within compute (iPhone, iPad, Mac) and increasing adoption of the iOS ecosystem driving continued EPS growth and a commitment to cash distributions, the stock remains our top pick.
Following an evaluation of the broader storage market and EMC's (EMC) (rated at Outperform, $30 price target) information storage segment (72% of revenue in 2012), we forecast revenue growth of 7.9% and 9.3% in 2012 and 2013, which drives our EPS to $1.68 and $1.95. We see midteens EPS growth as sustainable for several years. Given its broad portfolio and strategic assets, EMC remains a preferred IT hardware pick.
We expect Fusion-io (FIO) (rated at Outperform, $50 price target) to continue to benefit from strong market positioning in the disruptive solid-state-drive (SSD) storage market. Fusion-io's differentiated technology and business model, leverage to emerging Web-application trends, and high-return-on-investment enterprise solutions will likely enable healthy revenue growth with solid margins. Fundamentally, sales momentum is building and will become increasingly apparent over the next 12 months. We maintain our calendar 2012 and 2013 revenue and EPS forecasts of $442 million (up 49%) and $631 million (up 43%), and 36 cents and 38 cents, respectively. Fusion-io remains one of our top picks within the IT hardware space.