Three Key Products That Will Drive Apple in 2012
Monday, February 6th, 2012
By Sasha Cekerevac for Profit Confidential
The recent report on corporate profits from Apple Inc. (NASDAQ/AAPL) blew away analysts and investors with how strongly the company’s products are selling to the retail sector. For a company with a market capitalization of over $424 billion, it’s amazing at the rate it’s still growing. The question now is: what’s next for Apple?
I see the company’s investment strategy continuing to be successful in the retail sector and driving its corporate profits. “iPhone” sales are a massive component of their corporate profits and are hugely popular in the retail sector. Last quarter, over 37 million iPhone units were sold, a 128% increase over the previous year. Of the $46.0 billion total in corporate profits for Apple last quarter, iPhone sales made up $24.0 billion.
Three drivers for Apple in the retail sector in 2012:
1. The unbelievable iPhone sales figures for the “4S,” an upgrade to the previous model. There is a new “iPhone 5” coming this year and it is being hotly anticipated as a significant improvement over the “iPhone4” and 4S. There are no official reports from Apple, as the company is known for its secrecy, but rumors are floating around that it will be unveiling the iPhone 5 with a four-inch screen and a completely different casing, with an even more powerful computer running the software.
If history is any guide, the iPhone 5 launch for Apple to the retail sector will be in late summer or early fall, just in time for the fall holidays. This will undoubtedly push corporate profits. Can it exceed last year’s record sales of iPhones? Of course, no one can predict that, but, I spoke to several people I know and they are waiting for the new iPhone 5. It seems that the retail sector loves anything Apple produces, as it has built a reputation of exceeding the expectations of clients with better and sleeker products.
2. “iPad 3” is rumored to be released in March. Last quarter, the firm continues to sell iPads at a fast pace; 15 million units were sold to the retail sector. They are now expanding from the retail sector to the education side of the business with the recent push into textbooks for schools. More markets mean more possibilities for increased corporate profits, a strong investment strategy.
No official word as usual from Apple, but according to people I’ve talked to, both the new iPhone 5 and iPad 3 will most likely have new quad-core processors instead of the current dual-core chipset. More power to run applications is always in demand by the retail sector.
3. “iTV” is the huge potential driver in corporate profits for Apple. This investment strategy could really pay off with a whole new stream of revenue in this market; a bold investment strategy. The company will then have another hardware product to sell to the retail sector, and no doubt it will somehow incorporate an online, Web-ready portion for people to buy content online through the TV.
When you look at some of Apple’s products, like the “iPod,” you might see them as being more than simply a device. The iPod is also a delivery system for the company’s “iTunes” application and store, which adds even more corporate profits.
The stock has moved up sharply and I wouldn’t rush out to buy it today, but fundamentally it still offers value. I would consider being opportunistic this year and look to accumulate shares on pullbacks. As long as they can execute their investment strategy, corporate profits will continue to grow.
Apple continues to improve its physical product offerings in the retail sector and it is brilliant at creating additional streams of revenue to increase corporate profits. The company has had an amazing period of time during which its investment strategy to bundle both the software and hardware has become exceptionally successful. I think these three drivers for 2012 will only increase the level of clients entering the world of Apple.
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Sasha Cekerevac, BA Economics with Finance specialization, is a Senior Editor at Lombardi Financial. He worked for CIBC World Markets for several years before moving to a top hedge fund, with assets under management of over $1.0 billion. He has comprehensive knowledge of institutional money flow; how the big funds analyze and execute their trades in the market. With a thorough understanding of both fundamental and technical subjects, Sasha offers a roadmap into how the markets really function and what to look for as an investor. His newsletters provide an insider’s look at what the big funds are planning and how you can profit from it. He is the editor of several of Lombardi’s popular financial newsletters, including Payload Stocks and Pump & Dump Alert.
