Eye on Equities

New iPad will leave tablet competitors in the dust: Canaccord

The Globe and Mail

Apple CEO Tim Cook speaks during an Apple event as he introduces the new iPad as an image the device is projected on screen in San Francisco, California March 7, 2012. (ROBERT GALBRAITH/Robert Galbraith/REUTERS)

The new iPad appears set to be a resounding success when it premiers this Friday morning, judging by pre-order checks conducted by Canaccord Genuity.

Canaccord analyst T. Michael Walkley predicts the Apple Inc. tablet will see a record launch given that customers are already scrambling to get their hands on it.

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“Since we attended the iPad launch last week, our checks have indicated record pre-orders with wait times for shipping iPad models now reaching two to three weeks,” he said in a note. “Given the new iPad’s leading hardware specs and iOS developer and application ecosystems versus all tablet competitors, we anticipate Apple will continue to dominate both market and value share of the growing tablet market in calendar 2012-13.”

Canaccord's findings were released as Apple soared to fresh all-time highs today, hitting an intraday peak of $594.72. While the vast majority of analysts still rate Apple as a "buy," shares are quickly closing in on their average price target of $605.10.

Mr. Walkley aggressively raised his calendar year 2012 iPad unit sales estimate to 65.6 million from 55.9 million. For 2013, he now sees 90.6 million unit sales, up from 79.7 million. That resulted in a modest bump up in his earnings per share estimates for the period.

“We believe the new iPad has raised the bar relative to competing tablets with impressive hardware specs, competitive pricing, and the leading software ecosystem of over 200,000 iPad-specific applications,” Mr. Walkley said.

All this no doubt has competitors worried. In recent meetings Canaccord held with original equipment manufacturers for Android-powered devices, most focused their discussions and marketing plans on new smartphone offerings - essentially conceding the high-end tablet market to Apple in the near term, he said. “Tablet OEMs indicated difficulty competing with the iPad 2, let along the new iPad.”

Besides the U.S., Puerto Rico and the U.S. Virgin Islands, countries getting the new iPad Friday are Canada, Australia, France, Germany, Hong Kong, Japan, Singapore, Switzerland and the United Kingdom. Sales begin at 8 a.m. local time. Apple will make the tablet computer available in 25 additional countries a week later.

The new iPad is Apple's third version and sports a faster processing chip and a sharper screen. It works with a faster broadband network called 4G. U.S. prices start at $499 and Canadian prices at $519 (Canadian).

Upside: Mr. Walkley raised his price target to $710 (U.S.) and reiterated Apple as a “top pick.”

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The home-turf advantage currently enjoyed by Sobeys is drawing to a close as large American retailers move in, resulting in a price target revision for parent company Empire Co. Ltd. .

Wal-Mart is moving into former Zellers locations and Target enters the Canadian market next year, producing “more square footage than the Canadian market can handle,” according to CIBC World Markets analyst Perry Caicco.

“Sobeys is certainly prepared for the coming supermarket wars, with improved systems, processes and supply chain; differentiated stores; and a stronger private label program,” says Mr. Caicco. “But the company, because of its geography, is also more exposed to new competitors than is optimal.”

Downside: Mr. Caicco is maintaining his ‘sector perform’ rating and lowering his price target by $5 to $65.

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Brigantine Advisors analyst Barbara Coffey is initiating coverage on DTS Inc. with a “buy,” believing the stock is undervalued given the digital technology company’s attractive business model.

The company is seeing positive trends in both the Blu Ray and network-connected device markets, says Ms. Coffey, and its automotive and home AV end markets seem to be stable. She expects 16 per cent revenue growth for 2012 and revenues of $26.8-million (U.S.) for the March quarter.

Upside: Ms. Coffey set a price target of $33.

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Alimentation Couche-Tard’s third-quarter fiscal 2012 results have been dubbed “slightly positive” by RBC Dominion Securities Inc. analyst Irene Nattel.

The company’s quarterly earnings per share of 48 cents were in line with consensus and ahead of Ms. Nattel’s 42 cents estimate. Plans appear to be in place for expansion into the European market and management repurchased 2.4 million shares in the third-quarter, or 1.3 per cent of the shares outstanding. It has also announced two dividend hikes in the past 12 months.

Upside: Ms. Nattel maintained her "sector perform" rating and raised her price target $1 to $36 (Canadian).

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Mega Brands Inc. reported fourth-quarter net income just above breakeven as sales came in lower than expected in both North American and International markets. But Versant Partners analyst Neil Linsdell remains upbeat on the stock's future, commenting that retailers appear to be allocating more shelf space to construction toys and to Mega Bands' products in 2012.

Upside: Mr. Linsdell cut his price target by $3.50 to $14.50 and maintained a "buy" rating.

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