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Apple's Stuck Stock Frustration Will End With Innovation


The iPhone and iPad literally changed end markets, proving that the single greatest thing Apple can do to move the stock is continue to innovate.

Sean Udall is the author of the TechStrat Report, a tech focused newsletter. The following is a free sample. Take a free trial!

It seems that everyday the blogosphere/print media and TV media is awash with mounting ideas as to how Apple (AAPL) can move the stock. I'm going to say right now that I think most of them are flat wrong.

Valuation is already crazily cheap and the company has a prodigious cash hoard. However, cash in and of itself isn't going to push a stock higher. Valuations are not going to push the stock higher -- if so the stock would have moved much more than it has.

The most frequently mentioned item for Apple to consider is a stock dividend. I for one don't think a cash dividend will do much to boost the shares -- at least not in a sustainable manner. Just see Microsoft (MSFT) as a great example of this. And a special dividend? Apple, please don't waste the cash in this manner.

The single greatest thing Apple can do to move the stock is continue to innovate, just as the iPhone and iPad literally changed end markets. Here are the chief things I believe Apple can do to help propel the stock to the $500s and beyond:
  • Bring out the iPhone 5 and give the hardware a significant refresh. In actuality this is very likely well on its way. The question is how radical the redesign will be.
  • Create another form factor for the iPhone 5. This could be a mini-iPhone, or maybe this is an uber-sized phone. Either way I believe this would generate a significant increase in sales -- especially a lower priced mini for the foreign markets.
  • Blow users out of the water with the next iPad. In this respect, the focus should be horsepower. A quadcore, fully 4G-enabled device.
  • Get to the market with an Ultrabook killer. Just as the iPad was what I termed "iNetbookkiller," I think a dual mode device (laptop and tablet in one) from Apple could be another landmark device that effectively checkmates part of the emerging Ultrabook market. And in this regard, Apple needs to address this threat as the Ultrabook market has the potential for significant share take. In my view, this would be the most powerful catalyst.
  • Apple TV? There has been lots of talk regarding the potential for this product. Time will tell, but I do think this has the potential to be a significant new revenue line. However, I think the items described above have the potential for a more immediate and powerful thrust higher in the shares.
Lastly, I would add that a stock split could do wonders here. Usually this sort of thing doesn't matter, but history shows that with truly unique growth stocks, a well-timed stock split can provide a powerful catalyst. All one has to do is look to Baidu's (BIDU) stock split in early 2010 to see such an effect. So my recipe for Apple is five parts innovation and one part financial engineering to create a potentially huge move in the shares.

New! The TechStrat Report by Sean Udall. Sean provides in-depth analysis, strategies and trades across the technology sector. Take a FREE 14 day trial.

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Position in AAPL

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