The Zacks Analyst Blog Highlights: Apple, Google, Microsoft, Marathon Petroleum and Marathon Oil

Oct 24, 2012, 09:30 ET from Zacks Investment Research, Inc.

CHICAGO, Oct. 24, 2012 /PRNewswire/ -- announces the list of stocks featured in the Analyst Blog. Every day the Zacks Equity Research analysts discuss the latest news and events impacting stocks and the financial markets. Stocks recently featured in the blog include Apple (Nasdaq: AAPL), Google (Nasdaq: GOOG), Microsoft (Nasdaq: MSFT), Marathon Petroleum Corporation (NYSE: MPC) and Marathon Oil Corporation (NYSE: MRO).


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Here are highlights from Tuesday's Analyst Blog:

Apple's New Gadgets Thrill… and Disappoint

Once again, I watched the live CNET video blog on Apple's (Nasdaq: AAPL) big media event, which not-so-coincidentally was on the same day that Microsoft is launching its new tablet, Surface.

Here were a few highlights of today's presentation by CEO Tim Cook and marketing chief Phil Schiller...

5 million iPhone 5s sold in the opening weekend. Fastest-selling phone in history.

3 million new iPod Touches sold

New 13" MacBook Pro is lighter, thinner, faster and has Retina display for $1,699

iBooks now integrated with iCloud

New iMac Desktop is 80% thinner, replaces optical drive with hard drive and comes in 21.5" and 27" sizes for $1,299 and $1,799

100 million iPads sold

More iPads sold in June quarter than all competitors' entire PC lines (not combined)

2,500 US schools using iBooks textbooks

94% of Fortune 500 testing or deploying iPad usage

New 4th Gen iPad has 2X faster Apple chip (A6X) for same price as last iPad, $499

New iPad Mini has 7.9 inch screen, 16G memory, and offers LTE cellular capability, starting at $329 (w/ numerous configuration options, upgrades, and price points)

3 Battles Apple Could Lose, Starting Today

There were many things that grabbed the attention of tech critics and Apple customers today, but I want to highlight 3 that hinge on competition from Google (Nasdaq: GOOG)and Microsoft (Nasdaq: MSFT).

1) The new 4th-gen iPad comes only six months after the previous model. Many customers on the blogs seem annoyed. While a natural consumer reaction, Is this justified? Should the company hold back on innovation so people don't have that unique sense of buyer's remorse that comes from disruptive technologies? Or, are most people getting used to it by now? 

2) Tim Cook made a point of noting the compatibility of Apple Desktop OS and Mobile OS. The tech geeks on CNET (actually a great group to listen to for these events) saw this as a direct shot addressing the competition, namely Microsoft and their new Surface tablet. By the end of the event, all of them felt that Apple offered few compelling reasons for consumers to ignore the Surface, given the comparable pricing.

3) The new iPad Mini is about $80 more than the comparable Google Nexus. Is that a good price point? Will it create Apple product cannibalization nestled between glorified iPods (the Touch) and the 4th gen iPad? Or, will it simply get ignored and fail to meet always-lofty expectations?

What did investors think?

In the hour or so before the start of the event, AAPL shares rallied hard from the lows at $622 up above $630, even taking a few stabs at yesterday's close ($634) without success.

But when the slide of pricing schemes for the iPad Mini were shown, the stock dropped hard and fast, trading from above $629 down to $622 in only 3 minutes on over 800,000 shares. Then it fell to $616 a few minutes later on over 1 million shares.

Clearly, investors didn't like the iPad Mini pricing either.

Marathon Petroleum: A Solid Pick

We have maintained our Outperform recommendation on Findlay, Ohio-based independent oil refiner and marketer Marathon Petroleum Corporation (NYSE: MPC).

The company, in its current form, came into existence following the 2011 spin-off of Houston, Texas-based Marathon Oil Corporation's (NYSE: MRO) refining/sales business into a separate, independent and publicly traded entity. Marathon Petroleum operates in three segments: Refining and Marketing, Speedway (Retail) and Pipeline Transportation.

It is the fifth largest domestic refiner with a combined crude oil processing capacity of approximately 1,193,000 barrels per day through its portfolio of six refineries. A major advantage for the company is its proprietary access to pipelines, which inhibits lower-cost competitors from supplying Marathon Petroleum's key markets.

Our bullish investment theme stems from Marathon Petroleum's scale advantage, impressive asset quality, and an extensive midstream/retail network that diversifies its portfolio and provides more stable revenue streams.

The company's financial flexibility and strong balance sheet are also real assets in this highly uncertain economic period. Marathon Petroleum remains in excellent financial health, with nearly $2 billion in cash/cash equivalents and an investment-grade credit rating with a debt-to-capitalization ratio of 24%. Furthermore, an attractive dividend yield and the $2 billion share buyback program – that commenced recently – highlight the company's commitment to create value for shareholders.

Marathon Petroleum is almost through with its $2.2 billion Detroit Heavy Oil Upgrading Project. Ongoing since 2008, the initiative – on budget and on schedule – is expected to finish later this year. The completion of the project will not only deliver an extra 80,000 barrels a day of heavy oil processing capacity but also free up capital expenditures and boost the company's free cash flow.

Marathon Petroleum is looking at strategic alternatives for some of its pipeline assets, including the possible formation of a master limited partnership by way of an initial public offering. We believe this potential spin-off could further enhance the company's shareholder worth and valuation.

These factors, coupled with the relatively inexpensive valuation, make Marathon Petroleum an attractive investment.

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