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Wal-Mart (WMT) Halves Apple (AAPL) iPhone 5c to $45

Stocks in this article: AAPL WMT

NEW YORK ( TheStreet) -- Wal-Mart (WMT) has undercut Apple's (AAPL) pricing model selling its iPhone5c for $45, a more than 50% in savings on the original $99 price. Apple has yet to comment on the aggressive pricing strategy though TheStreet's Rocco Pendola doubts CEO Tim Cook is unaware of the issue.

Best Buy (BBY) wrapped up a weekend sale which priced the iPhone 5c at $50. Wal-Mart, however, plans to sell the model at below-price throughout the holiday season.

Jeffries' analyst Peter Misek has upgraded Apple to "buy" from "hold", raising his price target to $600 from $425. Misek believes better gross margins will support the company until the iPhone 6 launches. BMO's Keith Bachman has also raised his price target to a comparatively modest $508 from $480.

Wal-Mart shares closed 1.28% lower to $71.87, while Apple shares gained 0.98% to $487.75. The S&P 500 fell 0.85%.

TheStreet Ratings team rates Wal-Mart Stores Inc as a Buy with a ratings score of A. TheStreet Ratings Team has this to say about their recommendation:

"We rate Wal-Mart Stores Inc (WMT) a BUY. This is based on the convergence of positive investment measures, which should help this stock outperform the majority of stocks that we rate. The company's strengths can be seen in multiple areas, such as its revenue growth, notable return on equity, good cash flow from operations, growth in earnings per share and increase in net income. We feel these strengths outweigh the fact that the company has had lackluster performance in the stock itself."

Highlights from the analysis by TheStreet Ratings Team goes as follows:

  • WMT's revenue growth has slightly outpaced the industry average of 3.1%. Since the same quarter one year prior, revenues slightly increased by 2.3%.
  • Wal-Mart Stores Inc has improved earnings per share by 5.1% in the most recent quarter compared to the same quarter a year ago. The company has demonstrated a pattern of positive earnings per share growth over the past two years. We feel that this trend should continue. During the past fiscal year, Wal-Mart Stores Inc increased its bottom line by earning $5.02 a share vs. $4.55 a share in the prior year. This year, the market expects an improvement in earnings ($5.20 a share vs. $5.02 a share).
  • The return on equity has improved slightly when compared to the same quarter one year prior. This can be construed as a modest strength in the organization. When compared to other companies in the Food & Staples Retailing industry and the overall market, Wal-Mart Stores Inc's return on equity exceeds that of the industry average and significantly exceeds that of the S&P 500.
  • Net operating cash flow has slightly increased to $6,357 million or 3.18% when compared to the same quarter last year. In addition, Wal-Mart Stores Inc has also modestly surpassed the industry average cash flow growth rate of -2.34%.
  • The net income growth from the same quarter one year ago has exceeded that of the Food & Staples Retailing industry average, but is less than that of the S&P 500. The net income increased by 1.3% when compared to the same quarter one year prior, going from $4,016 million to $4,069 million.

TheStreet Ratings team rates Apple Inc as a Buy with a ratings score of B+. TheStreet Ratings Team has this to say about their recommendation:

"We rate Apple Inc (AAPL) a BUY. This is driven by a few notable strengths, which we believe should have a greater impact than any weaknesses, and should give investors a better performance opportunity than most stocks we cover. The company's strengths can be seen in multiple areas, such as its revenue growth, largely solid financial position with reasonable debt levels by most measures, expanding profit margins and notable return on equity. We feel these strengths outweigh the fact that the company has had lackluster performance in the stock itself."

Highlights from the analysis by TheStreet Ratings Team goes as follows:

  • AAPL's revenue growth has slightly outpaced the industry average of 0.7%. Since the same quarter one year prior, revenues slightly increased by 0.8%. This growth in revenue does not appear to have trickled down to the company's bottom line, displayed by a decline in earnings per share.
  • AAPL's debt-to-equity ratio is very low at 0.14 and is currently below that of the industry average, implying that there has been very successful management of debt levels. To add to this, AAPL has a quick ratio of 1.54, which demonstrates the ability of the company to cover short-term liquidity needs.
  • 41.67% is the gross profit margin for Apple Inc which we consider to be strong. Regardless of AAPL's high profit margin, it has managed to decrease from the same period last year. Despite the mixed results of the gross profit margin, AAPL's net profit margin of 19.53% compares favorably to the industry average.
  • Current return on equity is lower than its ROE from the same quarter one year prior. This is a clear sign of weakness within the company. When compared to other companies in the Computers & Peripherals industry and the overall market, Apple Inc's return on equity exceeds that of the industry average and significantly exceeds that of the S&P 500.
  • Apple Inc's earnings per share declined by 19.8% in the most recent quarter compared to the same quarter a year ago. This company has reported somewhat volatile earnings recently. We feel it is likely to report a decline in earnings in the coming year. During the past fiscal year, Apple Inc increased its bottom line by earning $44.16 a share vs. $27.67 a share in the prior year. Next year, the market is expecting a contraction of 10.9% in earnings ($39.36 a share vs. $44.16 a share).

Written by Keris Alison Lahiff.

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