Sun04202014

Business & Real Estate

Consumer confidence will lift market

If history is any indicator, the market should perform strongly in the second half of the year. Since World War II, every year the S&P 500 posted gains in January and February, the market recorded a positive year.

Stocks in 2013 have registered the best first-half performance since 1999, despite the U.S. economy stuck in low gear for more than a year with an average annual growth of 1.7 percent.

But according to the monthly publication Blue Chip Economic Indicators, gross domestic product is expected to increase to 1.9 percent this year, fueled by consumers’ optimism. Consumers account for roughly two-thirds of U.S. economic activity, and the improving outlook for consumer spending is one reason the market should gain steam in 2014. When consumers have money to spend and invest, you can bank on a rising stock market.

Two Town Crier “50” stocks made headlines last week.

• Intuit Inc. (INTU; $62.76) agreed to sell its Financial Services Business to the private-equity firm Thoma Bravo for $1 billion. Intuit also plans to sell its health group, which provides financial services and software to hospitals.

The divestures are part of Intuit’s major restructuring, designed to allow the company to concentrate more on its core business of tax programs for consumers and small businesses. The proceeds from both sales should speed up share repurchasing.

Intuit began in 1983 marketing Quicken Personal Finance Software. Annual revenue now tops $4 billion, with a net income of $792 million. With 8,500 employees, the company plans to diversify beyond desktop software and Web services into software for tablets and smartphones.

Most analysts rate Intuit stock as a hold, though Raymond James Financial Services upgraded it last week to a strong buy. The mean target price per share is $65.94, with a high of $85.

• Apple Inc. (AAPL; $412.69) is still No. 1 in the U.S. smartphone market, but its share of the market remained virtually flat at 39 percent in the quarter, according to researchers, while Samsung Electronics gained two percentage points to take a 21 percent slice and Google Motorola captured 8 percent.

Among smartphone operating systems, Google’s Android maintained a 52 percent share of the U.S. market, followed by Apple at 39 percent.

Looking ahead to what may be its next big release, Apple applied for a trademark for iWatch in Japan. Wearable computing devices have suddenly become a crowded field, with companies racing to bring their new products to consumers. The market for wearable computers could exceed $12 billion by 2018, according to one research firm.

Apple projects third-quarter revenue totaling between $33.5 billion and $35.5 billion, gross margin between 36 and 37 percent, and operating expenses between $3.85 billion and $3.95 billion. Other expenses are projected at $300 million.

The majority of analysts who cover Apple consider its stock a current and long-term buy. Among 50 brokers surveyed, the mean target price is $538.74, with a high of $888.

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