AAPL: Here We Go Again

Bear looking at Apple

Apple stock dipped near $400 yesterday (April 17, 2013). They release earnings next Tuesday. Historically speaking and if memory serves me correctly, $AAPL almost always dips after earnings reports—buying on the selloff due to “disappointment” would be my play if getting back into $AAPL.

The stock is currently getting negative sentiment from (arguably hack) analysts (with historically goofy track records on $AAPL) listening to Digitimes supplier checks (not a historically reliable source) … but my gut says it’s a buy around here. Foxxcon, their leading supplier is trying to hire 10,000 new employees to build stuff—you do the math. Oh, and they sell north of $4B a week (their average last quarter) and have ~$140B in the bank

What could Apple do … they're doomed, right?

There’s a few things Apple could do to move up in price and create even more shareholder value.

One, and the most probable, is that Apple TV could graduate from a “hobby” to a real product, by release something in the next 12 months that will do to television/cable what iTunes did to the Music business: fundamentally change it. Netflix and Hulu are already making headway here with their streaming on demand, as is Amazon with Prime. Wouldn't acquiring Netflix be interesting? ($NFLX market cap ~$9.4B at close Apr 17)

Or, they could become a payment provider. They have more iTunes accounts with payment methods on file than anyone on the planet, and clearly enough cash on hand to do whatever they want to do on this front. Lots of unknowns and this is purely WAG speculation, but they are one of the few that has the ability to fundamentally change the consumer payment business by virtue of the ubiquitousness of their platform (iPhones) … which, by the way, show no signs of demand slowing down (in fact I think they're picking up in the US ahead of Android).

A long shot play would be building out a nationwide gigabit fibre connection to every major market in the country. Google recently announced that their KC fiber experiment has led to the conclusion that it can be a profitable business. Apple enjoys political access that few companies have to make the environment potentially favorable to this type of move. Google's cost estimate to build out nationwide gigabit fiber network to reach 15% of the US would cost an estimated $11B over 5 years, less than a quarter of their annual profit. Apple has the cash to do this, and it would be a really sweet complement and bargaining chip with content providers for accelerating an Apple TV strategy…

Or, they could also just keep on adding another $10-15B a quarter to their coffers. That wouldn't exactly suck for shareholders or their future prospects.

My target price? $600+ by year end, and headed north (barring global economic implosions which are sadly not out of the mix). I think I’m a buyer next Tuesday.

Photo Credit: erban from Flickr

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Ryan Thrash is the husband of an insanely supportive wife, father of 2 great kids and lives in Dallas, TX. Having co-founded the MODX content management platform in 2004, he looks forward to a world where HTML5 and CSS3 is the norm, and IE6 ceases to exist.

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