iPad rumors point to big year for Apple

iPad rumors and a possible dividend have investment analysts excited. But should the vague iPad rumors get consumers excited, too?

Strong Apple products in the pipeline — and a possible dividend — led one “Fast Money” analyst to predict the company had a lot more upside in 2012.

 “I definitely think a dividend is going to happen in calendar ’12,” ISI analyst Brian Marshall said Tuesday, adding that most investors don’t expect one.

 Apple last paid a cash dividend on its common stock in December 1995.

“They could do a dividend of, say, 250 basis point-yield and only pay out 20, 25 percent of their free cash flow,” he said. “They’ve got tremendous flexibility here, obviously, and we think that would drive an incremental $4 billion of buying power to the stock, which is essentially the equivalent of a Top 10 holder. We think a dividend would be a material catalyst for the stock.”

Shares of Apple traded upward of $409 midday, up more than 1 percent.

“They still have tremendous opportunity to grow,” he said.

Marshall, who had a $500 price target on the stock, said he expected launch of the iPad 3 in March and Apple TV in 2013, based on a three-year product cycle.

Marshall said the Apple TV will likely be a standalone flatscreen television set with an Apple interface, or “the first product to seamlessly integrate the home office and the living room.”

Trader Brian Kelly liked it.

“The trade is to buy,” he said. “There was no hot stock or hot toy this year during the holiday season. It was the iPad, it was the iPhone, it was the (iPod Touch). They have it. People line up at the stores to buy their product. You keep buying it.”

What’s On Deck for Cisco?

Marshall increased Cisco’s price target on improved performance since the company reset expectations in August and maintained a “buy” rating on the stock.

“It was like a coiled spring,” he said.

Federal spending was expected to increase in FY 2012. Marshall also liked Cisco’s positioning within the sector.

“Clearly data traffic is only going to grow 50 to 100 percent per year,” he said. “With their incumbency there, we still like Cisco here. We see another 20 percent upside to $22 in our view.”

OptionMonster cofounder and “Fast Money” pro Jon Najarian said he “loved” the stock, calling the company “one of the biggest cloud plays” in the space.

Trader Joe Terranova noted that institutional ownership moved out of Cisco stock and into Juniper after disappointing earnings results in August but said he was an owner and expected growth on increased government spending.

New Leadership at IBM

Marshall said IBM’s transfer of leadership to new CEO Virginia Rometty would be seamless.

“I don’t want to say the company runs itself, but it’s got great operations,” he said.

But at a valuation of 13 times earnings and roughly 80 percent of earnings coming from share repurchases, Marshall said the stock did not have a lot of upside left.

Marshall maintained a “neutral” rating on IBM and a price target of $32 per share.

“We’re going to look for something with a little more secular growth in our view.”

Najarian sounded positive on the new CEO coming from within its ranks.

“I don’t think there’s a single thing not to like about the IBM strategy,” he said, calling it a similar story to what happened at Apple. “It speaks to the depth both of these two companies have.”

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