Seven Future Catalysts for Apple

I have taken a leave of absence from investment writing over the last month in order to finish my book titled The Alpha Hunter that will be released by McGraw Hill this fall. Along with the book I will be launching a revolutionary online investment advisory service at economictiming.com so my time is limited this summer. However, I can’t help myself...I’ve got to post on Apple’s (AAPL) latest news. Here are my takes:

1. Calvin Huang of Daiwa Securities is the Apple analyst that everyone should be listening to. Huang totally trumped Piper Jaffray’s Gene Munster who had previously told investors not to expect the Tablet to be released until 2010. I read Munster’s report from last month and immediately thought his logic was off base. Huang is the analyst with the best contacts in Asia, he’s located in Taipei, he has done the real research. He is reporting that Apple will ship the 10-inch touchscreen tablet in Q4 2009. It will be manufactured by Hon Hai Precision Industries with chips from Infineon with technology from ARM Holdings.
2. Steve Jobs is back. The WSJ has reported that Jobs has been actively working with the company during the last six months. Unnamed sources from Apple suggested that his publicly announcement return to the company will be held in conjunction with a special product announcement. That new product will be the Media Tablet. Jobs will redefine the netbook space this holiday season. It needs to be announced soon in order to freeze the current netbook market and to allow developers 3 months to create applications for the new device. This is the timeline that Apple follows for a new product that doesn’t have to compete with their existing products. Because there is no threat of cannibalization, Apple wants to get the word out asap.
3. China will be one of the 80 countries to distribute the iPhone in August. Consumers in China and India will flock to the cheaper 3G iPhone. Jobs will probably announce the deal at his come back event.
4. The $99 iPhones will sell like hot cakes at Wal-Mart (WMT).
5. AT&T (T) made a huge mistake in not allowing the new iPhone 3GS tethering capability to work in the USA. This small piece of technology is a high speed wireless game changer and it represents the final straw to break the back of the AT&T/Apple exclusivity contract that runs through 2010. Apple will not renew the deal and the iPhone will become available through Verizon next year. A big Apple catalyst for 2010.
6. There’s only one thing better than using your finger to navigate the latest technology; using your voice. Apple’s voice control software built into the iPhone 3GS could become a wonderful surprise.
7. The Macbook Air price cut is significant. That is the best laptop on the market by far. Any business user who owns one knows they can never go back to the old ways. The Air will see increased demand.

So now let’s talk price targets. The announcement of Steve Jobs' return in conjunction with a product announcement pushes this stock up to $170. The announcement of a China iPhone deal pushes it up to $180. And holiday sales expectations to be released in January of 2010 could push it over $200. Trade accordingly. The biggest pop could come by the end of July.

Disclosure: Long AAPL.

Comments

[Economyst:]

Lets calm down a little first. As a holder of Apple stock Jason you are a cheerleader for them.

1) Will the netbooks cannibalise sales of smaller Apple notebooks? Why would I pay for a new 13" notebook as well as a 10" netbook? I would perhaps buy the netbook but then a larger screen notebook.

2) How will they redefine the netbook space? The reason netbooks have taken off is there low price. Apple will not compete on price and price is the key motivator in the rapid sales of netbooks.

3) $100 cheaper Iphone will not make people flock to the Iphone as you mention - monthly line rental remains the same. When you consider that Apple is charging circa $500 to AT&T for the Iphone - this has to be recouped either through higher monthly airtime or higher up front cost. Reducing the upfront cost will only bump up the price of the monthly line rental. I have heard nothing regarding Apple reducing the cost of the Iphone to carriers. Case in point will be the unsubsidised price which will remain high.

4) This repeats point 3 above - saying it twice will not make your argument any stronger.

5) You can tehther if you jailbreak the phone. The carriers want you to pay for mobile broadband access twice - once on the phone and the other via a USB dongle in your PC. All carriers do this not just AT&T. I don't expect Verizon to pick up the Iphone as its owned by Vodafone who baulked first time around at Apples demands when it initially wanted to sell the Iphone 2G. Verizon is moving to LTE whch will bring it in line with Vodafones GSM based infrastructure. So buying a CDMA based Iphone next year only to see Verizon move to LTE in 2012 will be a dumb move.

6) Dumb phones have had voice activation/control and saying this is a selling point only highlights what was missing in the previous Iphone. If this is such a surprise then you set the bar very very low when it comes to expectations.

7) This is not even analysis its just an opinion. Best based on what? Lack of DVD Drive? Lack of ports? What is the old way? The Air was a stripped down notebook with the only aime being to fit inside an envelope and you have to pay for this with a compromised product.

Jun 10 07:32 AM

[mollytjm:]

wonderful article and good to see you back on SA. Good luck on the book...i'll look for it when it's released.
it always amazes me when supposedly tech analysts miss the obivous...that Apple innovates faster and better than anyone else and that's the name of the game. They're a great company with lots of $$$ and they value their customers. They have multiple streams of profit and income and they won't care if they sell a few less 13 inch laptops, if they sell 40 million netbooks, which they probably could. their OS is just terrific and Snow Leopard will prove unbeatable.
Long APPL, in case you couldn't tell.

Jun 10 10:44 AM

[Charlie P:]

Great article. I Printed it and have it hanging on my buletin board, and intend to track the time lines you sighted.

I would bet that the Economyst (above) is a disgruntled PC user.

Jun 10 11:33 AM

[J Clinton Hill:]

very useful info... thx... all the best on your book too...

Jun 10 07:22 PM

[John Galt:]

You have made some great economic calls and you seem to really know the company Apple. Thanks for taking the time to put your thoughts on paper and best of luck with the new book.

$

Jun 10 10:47 PM