Pacific Crest Doesn't Expect EMC's Profit Recovery To Materialize Until 2016

Brent Bracelin of Pacific Crest Securities on Sunday commented in a note that

profits are likely to “snap back materially” in 2016 after a three-year investment period. Bracelin notes that EMC's profits rose 40 percent, 21 percent and 14 percent during 2010, 2011 and 2012, respectively, due to a cyclical recovery and prior investments in new technology that helped the company accentuate share gains and contributed to 764 basis points of operating margin expansion to 25.1 percent in 2012 from 17.4 percent in 2009. Bracelin adds that since 2012, EMC has shifted its focus back to investing in new technologies that have created an overall drag on margins and profit growth throughout 2013 and 2014. 2015 will be the final investment year as Bracelin doubts shareholders will tolerate a fourth year of investment, especially with activist investors involved in the picture. Shares are Outperform rated with a $30 price target.