Seven Quotes From Goldman Sachs' Note on Apple That You Have to Read

One of the biggest stories in Tuesday’s news cycle comes from Goldman Sachs GS.

In a research note from April 1, 2013, the company removed Apple AAPL from its Conviction Buy List citing lower than expected market share.

While the headline is important, there was a lot more to the report and most of it is bullish. Here are seven other quotes from the report worth reading.

The dividend will increase-- and not by just a little.

“…we believe Apple is set to announce a new capital allocation plan in short order, and a substantial increase in its dividend and/or share repurchase authorization could provide a healthy floor for the stock price.”

The naysayers who said the iPad mini didn’t have a place in the product line were clearly wrong.

“…we believe it is now clear that the iPad mini has been far more successful than we anticipated, and the iPad family may be permanently tilted towards this smaller form factor.”

It’s still about the ecosystem.

“We continue to believe Apple’s platform-centric business model makes its cash flows and installed base loyalty far more resilient than traditional hardware-centric companies.”

Expect iPad Mini demand to continue.

“…we believe iPad mini demand remains robust, and as a result, we believe this category will account for a far greater portion of total iPad sales than we previously anticipated.”

iPhone demand remains soft, especially with the iPhone 5S on the way.

“We lowered iPhone units due to our view that the iPhone 5 product cycle has generated less new user growth and installed base upgrades than we had previously hoped. While we left our March quarter estimates unchanged, we reduced our June quarter unit expectations to 30.92 million from 33.47 million previously. This is based on our belief that demand will wane ahead of the upcoming iPhone 5S refresh…”

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Purely based on valuation, Apple is a steal at these levels.

“Even on our new estimates, Apple’s valuation remains remarkably depressed. Its CY2013 P/E of 9.6X is a 7% discount to the IT hardware group average (excludes outliers Fusion-io and Lexmark). In addition, a significant discount emerges when Apple’s cash stockpile is taken into account: its P/E ex-cash of 6.5X is 26% lower than IT hardware average of 8.8X.”

Those “rumored” products are beginning to become part of analyst’s thesis.

“…new product innovations such as iWatch and iTV could emerge over the next year, further enhancing the company’s overall platform reach and ability to monetize its installed base.”