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I am a former private equity investment analyst. I have made correct calls of these companies before critical accelerations: Apple, Google, Las Vegas Sands, Watson Pharmaceuticals, BP, Protective Life Corporation. My undergraduate degree is in psychology, where I studied human emotions,... More
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  • Primary Secondary Digital Markets 0 comments
    Sep 29, 2012 10:58 AM | about stocks: AAPL, ATT, VZ, EBAY

    There was a time, when smart phones were new, literally. But now, they are used. What will become of these used phones and their used software? What stocks will observe valuation changes because of this?

    eBay has thousands of listings for used iPhones, nowadays. Their completed listing for a one week span are also in the thousands. This means that sale on eBay of used phones are in the tens of thousands per year. This means that of the total amount of new iPhones sold in the past, eBay accounts for a respectable amount of their grand total. Add these amounts to other web sites that offer buy-backs for phones, and we are looking at a hefty chuck of the global used iPhone market.

    Then there is AAPL, and what will become of new smart-phone revenues? With smart phone trend growth accelerating, and AAPL capturing well into the double digit percent of that market, they are likely to see continued upwards trend in new iPhone sales. Therefore, there is no foreseeable threat that used phones will cannibalize new phones for iPhone. However, with rising cellular cost upon free upgrades, consumers might not buy new phones and hold off on increasing their cellular cost, although the percentage of those would hold off for this purpose is minimal, but still by my estimates is in the double-digit percentages.

    Because AAPL, GOOG, and SMNG have such similar smart phone models, a case study with the iPhones is appropriate. Brand loyalty between AAPL and GOOG mobile operating systems is not as high as either company would like. Therefore, there should be no reason to assume any differentiation between the valuation patterns between AAPL and GOOG mobile operating system component of revenue.

    Therefore, eBay remains a hold with their used mobile device platform, until they appropriately devise a way to thwart the competition for second-hand items as they have done in the past with other auction companies. The solution eBay will probably attempt is the purchase of a top second-hand dealer. However, this CEO and Board are different from Meg Whitman, who by most standards was quite liberal with acquisitions. This new CEO has not made any notable purchases since StubHub, which was a purchase under Whitman.

    Therefore, you must look at top stocks for secondary phone markets are potential targets for eBay. Those who believe eBay will choose to flatly compete with these sites have history up against them: they have proven a preference for independent brand differentiation of certain specialty items. They kept the Paypal name, Craigslist is partly owned by eBay and still maintains its brand-name, and the target company will likely remain a separate entity.

    The second important issue with used mobile phones is what happens when they are not sold. Data indicates double digit percentage of consumers keep their old smart phones as back-up, far more than that give their phones to somebody else, and a good portion of people sell them.

    This presents the boldest claim this article will make: that of primary secondary application developers. This basically states that a new device has been created, simply by outlasting its life-span.

    This market has not been created yet. There are no companies that make primary applications for secondary phones. But, estimate that the trend of keeping secondary phones is predicted by this author. These are good phones that if given a purpose through software could serve a vital place in a consumer's life.

    What is the difference between a primary secondary digital phone market vs. a primary smart touch digital market? Hardware capabilities.

    This author proposes that such phones would serve as primary units for mobile security systems. Such smart phones have intelligent perceptual capabilities such as an accelerometer, often a GPS, and a camera. These capabilities would allow for an incredibly expensive security system that could guard somebody's house or guard their possessions if they leave them in a hotel room or anywhere in a public space.

    Therefore, ATT's revenue stream, if this business model is adopted by the relevant market participants, will increase and therefore warrants an increase in ATT's price target. It is predicted by this author that different carriers would receive different adoption rates of this kind of system, due to their general disposable income demographic. The carriers that have the highest income for consumers are as follows.

    Therefore, this author posits that mobile carriers are able to have an elastic pricing structure with their digital packages for primary markets, and the emerging primary secondary market will further enhance mobile carrier's revenue streams.

    Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.

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