The Apple Investor is a daily report from SAI. Sign up here to receive it by email.
Photo: Matt Rosoff Business Insider
AAPL Off As Market Drops
Stocks are down for the sixth trading day in a row on light volume due to the holiday week as consumer sentiment misses slightly and jobless claims tick higher. Shares of AAPL are off with the rest of technology. Catalysts include iPhone upgrade cycles and adoption; update to the iPad in early 2012 (see below); continued market share growth of the Mac business line; penetration in China and emerging markets (see below); the evolution and potential re-conception of Apple TV; and platforms such as mobile advertising (iAd), books / publishing, gaming, mapping and social (Ping). Shares of Apple trade at 8.2x Enterprise Value / Trailing Twelve Months Free Cash Flow (including long-term marketable securities).Investors Value Apple On Products, Not Innovation (Asymco)
In recent interviews with the buy side, Asymco’s Horace Dediu is convinced that the investment thesis of the funds that control 70% of Apple’s shares is that the company is a sum of its current product line and nothing more. He says, “As soon as one growth wave was seen to start to fade, investors would say the same thing: Apple is done.” As an example, the stock went up when the iPod was hot in 2005 and when it looked like sales were fading, fell in 2006. In thinking about it this way, “Apple without the products will intrinsically be valued at zero.”
Apple To Becoming Largest PC Maker Next Year, Including Tablets (Canalys)
Including tablets, Apple will probably overtake HP as the top PC maker by the second half of 2012, claims research group Canalys. Analyst Tim Coulling believes that Apple’s traditional PC market share has grown from 9-15% in the span of a year. As for the combined PC / tablet projection, the release of the iPad 3 next year is expected to be a significant boost to Apple’s numbers. As it is, Apple rose to the number 2 slot during the third quarter this year.
Asia Is Apple’s Biggest iPhone Opportunity (AppleInsider)
Morgan Stanley analyst Katy Huberty estimates that carrier expansion has driven about 50% of overall cellular subscriber growth globally since 2008. She notes that investors are underestimating the significance carrier growth will play in driving iPhone sales. The iPhone could see huge sales numbers in untapped Asia, as only 22% of carriers sell Apple’s handset. That compares 56% in North America and 36% Western Europe.
Speaking Of Asia, iPhone 4S Close To Mainland China And Launching In Taiwan (Various via iDygest)
Reports are coming out that the iPhone 4S has just been approved by China’s Ministry of Industry and Information Technology. Meaning Apple’s new smartphone is getting closer to launching in mainland China (it’s already available in Hong Kong). Additionally, the three largest mobile telecom carriers in Taiwan will jointly launch the iPhone 4S around December 14-16.
The iPad 3 Could Ship As Soon As January (CNet)
Richard Shim, an analyst at DisplaySearch, believes that production on high-resolution displays destined for the next-generation iPad have begun. “It takes a couple of weeks for the production to go to the ODMs (the manufacturers). Then the manufacturer puts them in the housing. Then, that goes off to shipment. We could start seeing finished devices produced in December. And then being ready to be shipped in January. With volumes gearing up in February and March,” he said.
iPad Dominance To Slip From Over 80% Market Share To Just Under 70% In 2012 (eMarketer)
By the end of 2014, one in every three Americans, or 90 million users, is expected to have a tablet, according to eMarketer. By the end of 2011, 34 million Americans will use a tablet device, up 159% over last year. Tablets sales are expected to grow 63% to 55 million next year and to 76 million units in 2013. The iPad will continue to be the leading device in the tablet market, though its dominance will wane. Its current penetration in the tablet market will slip from 83% to 68% by 2014.
Apple Launching Gaming Subscription Model (Bloomberg)
In an expansion of its magazine and newspaper publishing subscription models, Apple is beginning to allow gaming publishers the ability to offer a subscription service to users. Users will now be able to access a bunch of games for one price. The program is being pioneered by Big Fish Games, who is offering dozens of its App Store titles to users for a monthly fee. Apple just opened up a whole new way for games to make money.
Apple Owns The Developer, Not Likely Flocking To Android Anytime Soon (Fortune)
According to Piper Jaffray’s Gene Munster, Apple owns about 85-90% of current mobile app spending in terms of lifetime developer revenue. That provides Apple with a huge advantage over other mobile OS platforms. And Munster suggests Apple will keep more than 70% of mobile app revenue share for the next three or four years. That alone will keep developers from flocking to Android or Windows and likely keep Apple from freaking out if Google moves a few more devices per year than it does. Perhaps Google could make up for it in ad dollars?
Cloud Experts Wanted At Apple (The Wall Street Journal)
Apple has been looking to recruit senior-level executives “with backgrounds in Web-based software” to bolster the talent pool for iCloud and other Apple cloud and web based services. The report also notes that Apple is also considering new iCloud apps that will “reduce the need for people to carry around numerous devices at once.” In other words, in-house app development to expand its web-based applications and services to compete with Microsoft and Google.
NFC rumoured To Come To Next Year With New iPhone (Digitimes)
Apple is rumoured to add support for near-field communications (NFC) technology to iOS next year (likely in the next iPhone model), giving owners the ability to use their phone as an e-wallet for making transactions. That would help penetration of NFC expand from what is currently less than 10% of smartphones sold to more than 50% in the next two to three years. It would also put it on par with Google’s Nexus S.
Apple Stock Due For A Bounce (The Wall Street Journal)
Apple’s stock has been in the toilet (along with everything else). So it’s not going to take a whole lot more selling for Apple to get to its 200-day moving average of about $363. That said, Apple has managed to bounce back from tests of the 200-day average twice since June. Will the third test be similarly charming? Either way, Apple has been mired in a trading range of between $360 and $420 for about five months now. It’s due for a bounce.
NOW WATCH: Tech Insider videos
Business Insider Emails & Alerts
Site highlights each day to your inbox.