Apple Strikes Advertising Gold

As the marginal effectiveness of television commercials continues to decline due to the adoption of DVR, it is more important than ever to be creative in methods of advertising. Look no further than the king of innovation, Apple’s (AAPL) CEO Steve Jobs, for the latest example of one who understands this evolution.

On February 18th, the partnership between Apple and American Idol was announced somewhat under the radar. American Idol’s Simon Fuller and Steve Jobs came up with an agreement that gives iTunes exclusive rights to sell idol performances online along with Apple product placement and promotion during the show. With this weeks airing of ‘Idol Gives Back’ Apple is embarking on the sweet spot of this deal as the finale gets closer with only 8 contestants remaining. Last year, ‘Idol Gives Back’ raised $76 million for charity as ratings soared.

This year’s episode will be even bigger and more ambitious as Robin Williams, Celine Dion, Forest Whitaker, Billy Crystal, Dane Cook, Kiefer Sutherland, Vanessa Hudgens, Ashley Tisdale, Jennifer Connolly, Elliott Yamin, Fantasia and Amy Adams join previously announced international talent and sports figures Bono, Brad Pitt, Reese Witherspoon, Miley Cyrus, Mariah Carey, Eli Manning, Peyton Manning, Fergie, Chris Daughtry, Carrie Underwood, Annie Lennox, John Legend, Snoop Dogg, Maroon 5, Heart and Gloria Estefan.

During this economic downturn, it is important to remember that Apple is a market share play. Even if weak consumer spending erodes overall demand for computers and phones, Apple could still flourish in such an environment as they march up the ladder of share gains. The American Idol partnership further cements Apple as the ‘king of cool’ and will only help the aforementioned cause.

In his predictions for 2008, Founder and President of Seabreeze Capital, Doug Kass mentioned that:

With the economy weakening and corporate profits tumbling, investors pay up -- real up -- for growth...Apple Computer will move into bubble status…(its) shares double in 2008 even as most equities decline.

Earnings season is now upon us and I expect many companies to report weak 1st quarter results based on the timid consumer and high commodity costs. This broad market theme should create a final entry point for those who want to be long Apple for the rest of 2008. I will be aggressively adding to my Apple position during any April weakness; I see this stock climbing to $300 by January 2009. There are too many catalysts to ignore. I will provide more in depth analysis in future articles.

Disclosure: Author has a long position in AAPL

Comments

[mrtaxx:]

This the second article in 2 weeks that suggested Apple may hit $300 within a year, Doug Kass is definately an Apple bull along with Piper Jaffeys Gene Munster who has a $250 price target. The next generation iPhone will be here soon, Apple sales of most of their products are up, Mac Air sub-compact is a success and Mac sales are up maybe soaring. All Apple news appear to be all good lately except for iPod sales which are down but this may be due to the iPhone which is also a music player.

2008 Apr 09 06:23 AM

[snosurfer08012:]

I, too, am an apple bull--long the stock and 09/10 call options. BUT , I begin to worry when people begin to put lofty targets on a stock price without any substantive information to back it up---everyone is gunning for apple, you could have a recall, a flop product, a terrorist attack, god forbid..whatever--for now, they are firing on all cylinders and I'm looking forward to a prosperous year as a shareholder in an otherwise shakey investing environment.

2008 Apr 09 07:28 AM

[Anthony Dad...:]

The 3G iphone will be big enough to propel this stock to $300.

2008 Apr 09 07:30 AM

[seeksome:]

Doug Kass AAPL shares will double in 2008 I hope you are right if so retirement is on the horizon! seeksomething.com

2008 Apr 09 07:36 AM

[Rob L:]

if apple signs on a bunch of worldwide carriers for the iphone, we'll see $300

2008 Apr 09 07:41 AM

[digivision:]

I agree with Rob L here, no reason for Apple not to go to $300
the halo effect continues to expand

2008 Apr 09 07:49 AM

[pasdeniaisage:]

$300 by january 2009? ya but, that's after the split! :)

2008 Apr 09 08:14 AM

[digivision:]

pasdeniaisage ...
I like your thinking :-)

2008 Apr 09 08:32 AM

[win:]

Hello - why publish an article without analysis or evidence to support it. If your only evidence for the $300 target is a quote from Kass, why publish a new article?

This is a fan boy piece, with no technical or fundamental analysis.

And, BTW, Apple may well go to $300, but if it does on "bubble-like status" it will pop like a bubble as well.

2008 Apr 09 08:41 AM

[digivision:]

Normally I would also agree with "johnny appleseed"
however in this case i don't consider $300 lofty at all.

A 3g phone and more carrier deals are on the way, that is a fact , that the Mac is gaining market share as fast as Dell is laying off workers is also a fact . The only wild card is the economy, i think we are in what I call a "selective recession" were it is not as wide spread as you can see it everywhere. Psychologically Gas prices are a big factor , you don't think about it until you hit that gas pump

2008 Apr 09 08:43 AM

[digivision:]

User 155834 I think you should read the whole article before posting , the article is not about stock price or an analisys


"There are too many catalysts to ignore. I will provide more in depth analysis in future articles."

2008 Apr 09 08:46 AM

[iBeleive:]

APPLE @ $300, get real!!!!!!! It will be lucky to be at $150!!!!! Computers are not selling. The iPhone is average at best. iTunes is the leader in the music store arena, compared to what???? Yeah right, same as GOOGLE being at $800 to $900, where is it now???? I sold and am quite happy cuz all this hype is what it is, just hype.... These analysts need to stop pumping steroids into their BRAINS!!!!!!!!!!!!!!!!...

2008 Apr 09 09:36 AM

[sane_man:]

"Disclosure: Author has a long position in AAPL" ===> Wishful thinking, he,he!!!

2008 Apr 09 10:08 AM

[Zach Bass:]

I'm also long on Apple, because they are bucking the trend. They are the true innovators in the personal computer industry, have been for decades. Now they have the tools they need, call it the halo effect, doesn't matter, to gain more market share now that Microsoft has waned.

People want value, not WalMart value, but real value, aesthetic, design and function combined. And Apple is leading the way to give it to them. The rest of the industry is stuck in the mud, wondering how they cheapen themselves into America's graces. It won't work, Apple will attain unprecedented market share in this movement, and we all will benefit.

-zach bass
zachbass.blogspot.com

2008 Apr 09 10:56 AM

[Tom B:]

We are in a recession. I don't know whether we are at "bottom" or not-- I'm inclined to think "not", and that we could see another 10-20% drop in the overall market-- after all-- housing and credit are STILL in the toilet. But I think this quarter's AAPL results ought to tell the story; if AAPL's done well, they will CONTINUE to do well through the recession*, barring company-specific bad news (iPods cause male pattern baldness). An iPhone's cheaper than a new house. And it might cheer you up.

*My guess on the recession: It ends 1/20/09 when "King George: goes back to Kennebunkport to play with his yachts instead of our economy.

2008 Apr 09 11:30 AM

[Zoltan L. K...:]

Apple is climbing a wall of worry concerning negative press ("propaganda"?). This shakes out the weak hands among shareholders.
Digital Life is converginging (computers, media, and mobile communication), and Apple is a master of the game through simplification, UI and user experience. As a reward there is not only a greater market and market share to be gained, but economies of scale.

2008 Apr 09 11:42 AM

[Constable Odo:]

$300 a share by January 2009? Gimme a shot of whatever your taking. Although I fervently wish it were to be so, but looking ahead into May and June seem like it might be a very slow period while waiting for iPhone 2 and the economy doesn't seem to be getting better. More layoffs are due in many sectors. I think even if Apple beats everything on April 23rd, I'm willing to bet the stock will go down due to profit-taking. Once the iPhone is released in June/July it will sell hugely, and I'm sure the 12 million unit sales of iPhone will be reached. However, Apple investors are a fickle bunch and if Apple reaches $210-$220 by January 2009, I for one will be extremely pleased, although it should been that high this past January 2008.

2008 Apr 09 02:13 PM

[BladRnr:]

@Yadoo!
What do you mean? Apple is outpacing the rest of the PC industry by 30% in Mac sales. 100K developers downloaded the iPhone SDK just after it came out and they have licensed ActiveSynch to shut up all those who said the iPhone was not a corporate phone. Apple now sells more music than anyone else. And right now Apple is at ~$151/share. They have gained $30/share in the last month.

And you think this is suddenly going to stop?

Apple does not enter markets unless it has high gross margins. They don't compete on cost. They are debt free and have $20B in the bank. As Jobs said a few weeks ago, the last time the country was in a recession, Apple poured even more money into R&D so they would be even more ahead than their competitors when the recession ended. What did they do? They came out with the iPod. End of story.

The bottom-line is that Apple is not like any other company. They are not tied to any specific industry. If any company can prosper in this recession, it's Apple.

So how do you like them apples?!

2008 Apr 09 05:39 PM

[Camden:]

It's likely that Doug Kass (a notorious short-seller) made his prediction back around the 1st of the year (when people make such predictions) when Apple was close to $200. That's probably why he mentions it moving "into bubble status". One might take away two thoughts from this: 1) he was expecting Apple to get close to $400 and 2) he was wrong about Apple continuing higher. Of course he may still turn out to be right about it doubling. Keep in mind that he is NOT a tech analyst, he owns a hedge fund. That said, I love his idea that Apple will be much higher by the end of the year. I certainly believe it will. As Jason points out, too many catalysts.

As for YADOO!!! saying "Computers are not selling", I guess he must be thinking about Windoze machines and missed the news that Mac sales were UP 60% yr/yr in the month of February.

2008 Apr 10 01:25 AM

[blogitforu:]

The war of the computer world is still going on and the question people still ask is which is better a mac or a pc. Now that u can run leopards on a regular pc and mac can run windows on an apple does this mean the war is over? From people experience they say running leopards on a regular intel or amd computer is much better than running it on a mac because of hte processor speed and everything and its much more smooth. Then u got windows running a mac people say that runs better too but who knows i never tried it personally myself but it is pretty cool that leopards can run a regular desktop now and people dont have to go out and spend thousands of dollar on a mac. What is everyone feedback on this situation and which do u prefer more. Tune in later for a video on how ot install mac on a pc.

2008 Apr 10 06:55 PM

[blogitforu:]

Many people have been experimenting Mac operating system to run on window machine. Some are successful and some are miserable. On April 5 2008, a friend decided to do the same. He had figure out how to run Mac operating system on window box. First thing he did was to change the Bios setup to be able to recognize the Mac operating system on the installation. After he has run the install after creating the image he downloaded. The installation was a success and now running Mac on a Gateway laptop. What an amazing hacking process knowing that it can be done.

2008 Apr 10 06:56 PM