Apple: One Product Down, Two to Go in the Race to Another Blowout Quarter

By Wayne Ferbert  MAR 07, 2012 4:15 PM

Apple could eclipse its record quarter again in the December 2012 quarter if it launches one more key consumer product in 2012.

 


Back on January 26 I wrote a piece about whether Apple (AAPL) could ever generate another blowout quarter like the one it has just announced (see Can Apple Repeat Its Spectacular Earnings Performance?). I am sure you remember it – Apple earned more than the GDP of many third-world countries!

My hypothesis was straightforward: Apple could eclipse its record quarter again in the December 2012 quarter if it launched three key consumer products in 2012:
After today’s announcement, Apple can check one of these off of the list. The 4G iPad is launching on March 16 – and Apple has packed some nice new features into it along with the 4G network capability. It has amazing screen clarity, better camera, voice dictation, and many developers lined up to launch new apps that take advantage of all of these features.

One other key feature that I noticed but may get overlooked by some: the ability for the iPad to be a mobile hotspot if the network provider permits it. Many busy professionals have iPads, and many have mobile hotspots as well. But the hotspots often have weak battery life. Using your phone as a hotspot isn’t much better – in fact it is worse. I am optimistic that tapping the 4G network will be tempting to many, and the larger battery in the iPad should supply a much longer battery life for the hotspot. Many busy traveling professionals will be able to shed an extra device with the iPad as a 4G hotspot; they will shed the mobile hotspot that they currently have. I know I will.

As for the Apple TV product upgrade announced today, that does not constitute a meaningful upgrade to the consumer television experience. Apple is still working on this one. Apple's CEO recently called Apple TV a hobby for the company. Don’t believe his efforts to downplay this product. Apple wants to redefine consumer entertainment consumption in the living room. The company won’t be happy until it can replace your cable provider as your key source for programming – believe it!

But the launch today of Apple TV doesn’t come close; it is the one product in this list that is most at risk of not occurring in 2012 and putting the blowout quarter that we expect at risk. However, with the 4G technology built in the iPad today, I think a 4G iPhone is now a fait-accompli in 2012. So, with one item on this list checked off, and one item a likely done deal, it will all come down to whether Apple can re-define the TV-viewing experience.

Apple would still have a great year with just a new iPad and new iPhone (and expected new Mac laptops). Expected growth in these products alone could justify the current market cap in my opinion. But Apple's stock has higher expectations, and to generate a new push for the stock, it needs to make inroads in another key area. Apple TV could be that landscape.

Editor's Note: For more from Wayne Ferbert, go to Buy & Hedge ETF Strategies.
No positions in stocks mentioned.

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