The Apple Investor is a daily report from SAI. Sign up here to receive it by email.
AAPL Reaching New Highs
Stocks are higher this morning on better than expected earnings from Comcast and Dell among others, news of French drug giant Sanofi-Aventis acquiring US biotech company Genzyme for $20 billion, and reports of housing starts smashing expectations. Shares of Apple are reaching new highs currently trading at about $363. Upcoming catalysts for the stock include news regarding Steve Jobs‘ health and return; the rumoured second quarter launch of the next generation iPad; monthly NPD data (Mac / iPod business); iPhone sales updates on new carrier Verizon as well as the launch of the iPhone 5 anticipated this summer; new revenue streams such as video, books and social (Ping); moving iTunes into the cloud; and the continued evolution and adoption of Apple TV. Shares of Apple trade at 14x Enterprise Value / Trailing Twelve Months Free Cash Flow (incl. long-term marketable securities).
Analyst Says Cheaper / Smaller iPhone Could Expand Market By 6x (Forbes)
Bernstein Research analyst Toni Sacconaghi sees two potential approaches to a cheap iPhone:
- The iPhone Mini: A smaller device with better battery life for less data intensive use, enabling carriers to offer a lower priced data plans.
- The iPhone Touch: An iPhone without a data plan, consistent with Apple’s strategy of minimising hardware form factors in order to facilitate third-party application development.
Sacconaghi’s analysis suggests a lower price phone could expand Apple’s addressable market by 6x in terms of units and 2.5x in revenue. Assuming the company captured 5% of the expanded market, he calculates that Apple would get an annual profit boost of $4.50 a share.
Apple Also Has Plans For Bigger iPhone (DigiTimes)
rumours coming out of Asia from component suppliers indicate that Apple may be increasing the screen size of the next iPhone model to 4-inches. This would put the iPhone in line with other smart phones currently on the market (Droid X2, Evo 4G). This comes after a report that Apple is also planning a smaller, lower price iPhone to keep up with demand and compete with cheaper Android phones. It’s not clear whether “smaller” refers to the device’s actual size or to memory capacity. Read more at Business Insider.
App Store Subscription Feature Already Drawing Antitrust Scrutiny (The Wall Street Journal)
The ink has barely dried on Apple’s new App Store subscription feature, one that will allow for magazines, newspapers and other publishers to offer varying length subscriptions to users of iOS devices, and people are already crying antitrust. Terms forbid publishers from including external links to purchase content or subscriptions and require publishers to offer in-app deals equal to or better than the same deals offered outside of the app. Of course, all in-app purchases are subject to pay 30% of revenues gained through the store to Apple. Find out why Matt Rosoff at Business Insider says the antitrust allegations are ridiculous.
iPhone Listed As Participant In NFC Rollout (Engadget)
Deutsche Telekom (parent company of T-Mobile), announced plans to rollout a mobile payment system based on Near Field Communications (NFC) technology in multiple countries over the next two years. In a PowerPoint presentation at the Mobile World Congress, the company outed the iPhone as a listed participant. Not surprising given recent rumours suggesting NFC capability inclusion in the iPhone 5 which is due this summer.
AT&T CEO Says Loss Of iPhone Exclusivity Good For Industry, Not To Mention Apple (Bloomberg)
How very sportsman-like. AT&T CEO Randall Stephenson said the loss of an exclusive U.S. hold on the iPhone will help the industry because it has led to free promotion of the device. “It’s good for the industry, you can’t turn on a TV now without seeing an Apple commercial,” Stephenson said at the Mobile World Congress in Barcelona. Verizon may activate as many as 2 million iPhones in the first quarter, according to analysts. AT&T activated 15.2 million iPhones in 2010.
Users Asked If They Want MacBooks To Have 3G Capability (AppleInsider)
Yes please. A customer survey from Apple looking at user satisfaction with the new MacBook Air also contains several questions related to 3G connectivity, suggesting that Apple may be considering adding the feature as a built-in option on future models of laptops. Based on the survey questions, next-generations of the various MacBook product lines could gain new functionality from both the hardware and software sides. The first major overhaul of the MacBook Pro line is due the early March.
iPhone Hasn’t Crushed The Verizon Network, Yet (GigaOM)
According to recent findings, the addition of the iPhone 4 to Verizon has had no noticeable affect on network performance. Activation of the new CDMA iPhone 4 hasn’t run into show-stopper problems, but the process is still working through some initial growing pains as new users have been trickling onto the carrier’s network over the past week. There was virtually no change (four-tenths of a per cent slower) in the performance of the network in terms of browsing and page load times. Granted, sales outside of Verizon’s existing customer base is only on day 6.