Behind the Money

Apple Is So Big, Citigroup Is Now Triple-Teaming It


How many analysts does it take to make a "buy" call on Apple ? The answer, at least according to Citigroup, is three.

Kimihiro Hoshino | AFP | Getty Images

Three analysts will tag team the world's largest company with one covering the software side, another tackling the hardware side and yet another person evaluating its semiconductor supply chain, according a note from the firm Monday.

"Citi is taking a unique team approach to Apple coverage," states the firm's bullish note. "This reflects Apple's broad impact to the technology supply chain and allows us to uniquely follow the company from several industry angles."

Traders questioned the move by the bank with some saying it was just a marketing ploy but not really needed. Others wondered if the move underscores just how unwieldy evaluating — and managing — a company as enormous as Apple has become.

"Apple's revenue and cash holdings are bigger than some small countries'," said David Greenberg of Greenberg Capital. "At this point, no one person could run the entire company, and dividing the company into two to three different ones based on products might be an idea whose time has come."

The "buy" call from Citigroup today is largely a trading, valuation call, with the analysts citing the more than 20 percent pullback in the shares from the stock's 2012 high.

Apple So Big, Citigroup Triple-Teaming It

"After a 28 percent correction since 09/21/12, Apple shares are consistent with past corrections in its own history and that of its peers," wrote the Citi team, which consists of Glen Yeung, Walter Pritchard and Jim Suva.

Citi dropped coverage of Apple in May after the previous analyst, Richard Gardner, left the firm.

Apple shares climbed Monday as investors followed Citi's advice. Reports of strong holiday iPad sales also added to the gains.

The Citi team acknowledges the "too big" concerns about Apple in their note, but says there are more worries than simple math.

Chart: Apple Is So Big, Citigroup Is Now Triple-Teaming It

"Observation of Apple shares versus its year-over-year revenue growth explains the recent sell-off," writes the team. "While easily attributable to the law of large numbers, exogenous factors also play a role."

They go on to cite competition from low-end smartphones and decreasing margins for tablets. This is the reason why their $675 price target, while representing an 18 percent upside from here, is well below the consensus on the Street.

So while the cynics may joke about the team approach, Citi and its 53-page dive into each one of Apple's business lines may serve its clients better over the long term than the steady drum of blind optimism that's become standard fare for the stock.

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