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Apple's Product Road Map Justifies the Sky-High Valuation

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Expect Apple's earnings to look spectacular at the end of the year on what's rumored to be a fantastic product release plan.

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So, expect Apple's new product launches to keep this a high-flying stock into the new year. But one word of caution: I think Apple's product strategy is going to show its first real signs of cannibalization this fall. The iPad Mini is an obvious candidate to steal sales over the long term from the iPad. However, the two combined will likely still result in more sales than just the 10-inch iPad delivered on its own.

In addition, I think the iPhone 5 is not a must-have product for consumers in the US that already upgraded to a new 4G iPad. The new iPhone 5 is really supposed to just have three main new features: 4G data, larger screen, and slimmer form factor. If you have a 4G iPad, you likely bring it almost everywhere. And if you already own the iPhone 4 or 4S, then that device is really just mostly an email client and phone for you – along with some favorite apps. In other words, if you already have a larger screen handy with a faster Internet data connection, why do you need the iPhone 5 with 4G? Especially when you factor in that the iPhone 5 will likely have worse battery life given the 4G data connection.

All in all, I am confident that the iPhone 5 will set new sales records because of the China Mobile launch. However, all past iPhones have always outsold the previous models combined. If this launch was in the US and Europe only, I am confident that that string would be broken. I am sure the iPhone 5 will set a sales record – but it will not sell more than all past models combined.

With that said, a new record is still a new record. Expect Apple's earnings to really look spectacular at the end of the year on the back of a fantastic product release plan (excuse me: rumored product release plan).

No positions in stocks mentioned.
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