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Introduction

Having been beaten, bludgeoned and brutalized over the past 6-7 months, Apple Inc. (NASDAQ:AAPL) has been the subject of a wide array of metaphors, similes and analogies that speak to the historic collapse of its stock which dropped 36% off its high, and wiped out around $225 billion in market cap. On the short term, the stock has closed down 8 out of the last 10 trading days, and remains well below its critical moving averages.

On February 5th, I wrote an SA article about AAPL entitled AAPL: New Analysis Offers Reasons For A Rally wherein I suggested there was a change in investor sentiment toward the stock. I opined that investor "focus" toward it had changed, and that "new" focus was to look for reasons for AAPL to rally, instead of continuing its decline. Furthermore, I suggested that this new focus was in its very early stage, and investors were looking for a catalyst that would kick off a rally.

My viewpoint hasn't changed, but the following metaphor brings a new theory to the table: Buy the steak, and hold AAPL for the coming sizzles. In my opinion, and considering all of its metrics, the AAPL "steak" is fat, juicy and it's the very best that one can buy. When the sizzle comes back, which could be in the very near future, I expect the price will more than double. With respect to the "sizzle" coming back, there are a number of possibilities that could light AAPL's fire in the near future and move the stock to new highs.

Sizzle #1 - The Apple Watch - Could Generate $10 to $15 Billion in Sales

Rumors have been swirling regarding the progress being made on the so-called Apple Watch. The rumors have included the fact that AAPL has a 100 person team working on the project and that Foxconn (OTC:FXCOF), AAPL's manufacturing partner, has been in active discussions with AAPL regarding the project.

Recently, fuel was added to the fire when "AppleInsider" reported its recent discovery of a patent application filed by AAPL in August 2011. The device described in the patent application sounds incredibly like the touch screen smart watch the company has been rumored to have in its pipeline, and was designed to use Corning's flexible Willow Glass.

According to "AppleInsider," the Patent Application describes "a wearable accessory that has a flexible touch screen display and uses a 'slap bracelet' mechanism to conform to the user's arm. The device, consists of a Bi-stable spring with flexible display, connects to a phone or another mobile device through Bluetooth and Wi-Fi."

"The accessory can turn into an uninterrupted screen when in its "curled state," with gyroscopes and accelerometers orienting the screen toward the user."

"With a touch screen user input, a user can accomplish a number of different tasks including adjusting the order of a current playlist, and reviewing a list of recent phone calls, or responses to a text message can even be managed given a simple virtual keyboard configuration across the face of the flexible display."

There are other companies toying with miniature gadgets in R&D programs such as Google's (NASDAQ:GOOG) "Project Glass." This item will purportedly be an "eyewear" device which is referred to as a "Head Mounted Display" that will project information in a smartphone-like format and will function in natural language voice commands. While it's a very interesting concept, it would seem to me that consumers would be more attracted to AAPL's comfortable and attractive wrist band that does just about anything, compared to having a mini computer hanging over one's face.

Since well informed pundits and analysts are already making financial projections relating to the Apple Watch, I would conclude that its launch is not too far away. For example, Katy Huberty, Morgan Stanley analyst, recently wrote in a note to clients that the Apple Watch would generate between $10 billion and $15 billion in annual revenue for AAPL, which would yield between $2.50 and $4.00 in yearly profit per share.

Sizzle #2 Apple TV - Multiple Components of "Disruptive Innovation"

Harvard Business School professor Clayton Christensen, the architect of, and the world's foremost authority on "disruptive innovation" sent out a number of tweets last week stating that AAPL's app-enabled television could be the biggest disruption in the video game space since the Wii enlarged the market, and the video gaming potential is just one reason for consumers to buy the product.

A second component of Apple TV could be another first for AAPL: The power to fix the archaic living room infrastructure that contains multiple remote controls for multiple devices that are unable to communicate with one another. I believe that most everyone would agree that it's irritating and archaic that at least three remotes are required to turn on a television, the cable/satellite and the sound system. I believe that a single consumer friendly device that would satisfy all functions would likely be embraced by a large percent of the population! Personally, I'd buy it immediately. Such a device would serve as a catalyst for AAPL's growth trajectory, and it would likely have a relatively long-term product cycle.

It would appear that this is precisely what AAPL has in mind. In Tim Cook's December 2012 interview with NBC's Brian Williams, Cook mentioned that when he goes into his living room and turns on the TV he feels like he's gone back in time 20 to 30 years. He then stated "A universal remote application that enables an iPad, iPad mini or an iPhone to control all living room technology would fill a major need."

A third angle of Apple TV that has enormous potential relates to the basic HDTV cable and satellite sector. It's widely acknowledged that these providers charge consumers for large quantities of content that are never viewed. If the AAPL system could allow users to cut the cord and purchase television content in an a la carte method, the cost savings will provide incentive to purchase the product.

The state of the cable and satellite sector is ripe for innovation. In light of the notorious consumer dissatisfaction toward cable, satellite and phone companies, an AAPL device could improve user experience and provide these operators that promote AAPL's device with a meaningful competitive advantage. For example, Katy Huberty of Morgan Stanley recently surveyed consumers and found they'd be willing to pay a 20% premium over current television prices for an Apple TV. Alternatively, there is also the possibility of AAPL partnering with a cable, satellite or telephone company with its device(s). Regardless of the final structure, the opportunities are massive because consumers could ultimately enjoy a much longed-for superior experience, and that will drive demand.

Sizzle #3 Apple iWallet

The iWallet represents yet another product that can create sizzle and profits for AAPL. While it's been suggested that the biggest barrier to entry is the payment infrastructure, that argument has been countered with the suggestion that payments be linked to the more than 500 million credit cards associated with users' iTunes accounts

While scanning devices to receive payment are fragmented throughout the retail industry, it's possible this fragmentation will give AAPL an edge over competitors because of its iconic status and being the world's most trusted brand.

The evolution of iWallet's infrastructure is unfolding in real time, and is exemplified by the iPad and iPod's continuing use and credibility as a retail tool. For example, Nordstrom is the latest retailer to begin implementing iPods and iPads into its payment structure. If enough retailers follow the trend it will provide AAPL with a pre-distributed network to receive secure payments through iWallet.

Believing In The Words Of Management - Tim Cook - Innovation and Bold Bets

While statements from management of a company are frequently self-serving, I believe the recent comments made by Tim Cook, CEO of AAPL at Goldman Sachs Technology Conference on February 12th are worthy of very serious consideration:

Cook said he's "never been more bullish" on the innovative products in Apple's pipeline.

Continuing, Cook stated: "Apple doesn't have a depression era mentality. Apple makes bold and ambitious bets on products, but we're conservative financially. Yet, if you look at what we've done in terms of investment -- last year we invested $10B in capex and expect to do the same this year."

Not Unexpectedly, No "Sizzlers" Announced at AAPL's Shareholder Meeting

AAPL's Annual Shareholder Meeting was held yesterday, 2/27/2013, and the business of the meeting was largely routine. There were no surprises nor dramatic announcements, and that's what should have been expected since an "Annual Meeting" has a fixed format, mundane issues need to be voted upon, and, for a variety of reasons, (including disclosure and legal issues), such meetings are highly structured and choreographed.

However, there were those (especially traders) that were hoping for multiple and dramatic announcements relating to such sizzlers as new product launches, a stock split, or a decision on how AAPL's cash hoard would (or could) be distributed to shareholders. However, these kinds of issues aren't normally discussed at Shareholder Meetings, and board of directors typically won't address hypothetical questions relating to such issues.

Since no headline announcements were made, the stock opened at $448.97 near its 52-week low, moved briefly into positive territory with the broader market, and was back in red shortly before noon. It hit its intraday low, $440.65, three minutes after the meeting ended, and closed at $444.57, down $4.40 (0.98%) for the day.

In my view, some of the forthright comments made by Tim Cook were significant and worthy of scrutiny, including the following: "The Company is in very, very, active discussions" about what to do with its growing stockpile of cash.

Regarding new products, Cook was "Appelesque" in his comments when he stated the Company is "looking into new categories" but said the Company doesn't talk about them.

At the end of the day (literally), traders were disappointed and they translated "no news" into "bad news," ignoring the protocols of Annual Meetings, and "forgetting" that the legendary Steve Jobs himself, rarely attended shareholder meetings.

I contend that the substantive sizzlers that AAPL has on the horizon will come forth in headline news at the right time, and in the right platform.

Significant Metrics

MetricFactor/Number
Closing Price 2/26/2013$448.97
P/E Ratio10.18
2012 Dividend Per Share$10.60
Next Ex-Dividend Date05/07/13
Effective Yield2.36%
52-Week High$705.07
52-Week Low$435.00
Beta0.80
5 Year Growth Rate71.66%
Current Year Est. EPS$44.70
Next Year Est. EPS$50.77
Compiled by Craig Van Pelt
SOURCE: Scottrade

Conclusion

I'm convinced AAPL will have a significant rally in 2013. The possibilities of big "sizzles" arising from headline news depicting "disruptive innovations" could propel AAPL to new highs. In my view, it's inevitable. In the meantime, buying the "Steak" is, by any measure, a superior investment and AAPL's metrics have created a "floor" beneath the stock. For example:

√ Its balance sheet shows some $137 billion in cash which translates to more than $100 per share

√ Its P/E of around 10 is below its sector, and way below Google's P/E of 24.77

√ Its current dividend yield of about 2.4% (which is likely to increase) pays investors to be patient, and there are continuing "whispers" of a possible stock split of 10:1.

Source: Apple: Buy The Steak - Hold For The Coming Sizzles!