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5 Years : From May 2012 to May 2017
O.K., Apple Inc. (AAPL), now what?
With the launch of its new iPad and an answer to the company's cash hoard question, it appears as if the Cupertino, Calif., company has addressed two of its biggest questions coming into the year. Anticipation over both items has contributed to Apple's stock rising 48% and nearly $200 already in 2012, leaving some to wonder what could propel it further.
While Apple rarely tips its hand, company followers see a new phone, new computers and a potential television set later this year. No matter what, though, the recent stock gains keep the pressure on Apple to produce products for which consumers will be willing to pay hundreds of dollars.
Apple declined to comment.
"At the end of the day, the real value creation will be continuing to create innovative products and gain market share," said Brian Marshall, analyst with ISI Group. "If they do, earnings will continue to grow, and the market cap should follow suit."
Competitive challenges, though, are rising. For example, a steady stream of competing smartphones using Google Inc.'s (GOOG) Android mobile operating system have made that software the most widely used in the world. Also, Microsoft Corp. (MSFT) is preparing a new tablet version of its forthcoming Windows 8 operating system as it tries to catch up to Apple's market share lead.
In addition, Apple continues to find itself fighting lawsuits over intellectual property around the world.
Apple shares closed Monday at $601.10.
Despite those hurdles, Wall Street remains positive on Apple, with 52 of the 57 analysts who follow the stock rating it at a buy or better. More analysts are talking about Apple's stock reaching $700, just as it is entering the $600s. And the projected jump in Apple's earnings this fiscal year is expected to equal roughly the company's total earnings recorded in all of 2010.
FBN Securities is among the more bullish analysts following Apple. The firm raised its price target on the company's shares to $760 shortly after Apple's dividend announcement Monday. FBN's reasons were very similar to Apple's statements about how a dividend and share buybacks would likely attract a new type of investor to the company.
The firm also noted sales of the new iPad appeared strong. FBN said it expected 11 million iPads to be sold during the current quarter, "but" the firm added, "we see upside to our estimate."
Apple said Monday that it sold a record 3 million iPads in the product's first weekend of sales. The device has a sharper screen, faster chips and quicker download speeds. Apple also said it plans to issue a dividend and buy back stock, effectively spending $45 billion of its domestic cash reserves over the next three years.
One possible area for future growth is going into the television-making industry, which has been regularly discussed since Steve Jobs' biography last year included a passage about Apple's efforts to build a new set. The Wall Street Journal also has reported Apple has discussed its vision for such a device with some media companies. The Wall Street Journal, like this newswire, is owned by News Corp. (NWS, NWSA)
Such a device could help Apple to further engrain itself into its customers' lives by seamlessly connecting all their mobile devices with their computers and televisions. Some analysts have said they expect the device to be unveiled sometime this year, while others are skeptical about when Apple would make such a move.
The potential TV market, however, is large and difficult. Set makers, including Samsung Electronics Co. (005930.SE, SSNHY), LG Electronics Inc. (066570.SE) and Sony Corp. (SNE, 6758.TO) have already begun integrating Apple-like technologies into their products, including voice control, mobile applications and media sharing. Reaction among customers has been mixed so far, and analysts said the market suffers from poor margins and widely varying technologies.
Another growth area could be a new iPhone, which now represents more than half of the company's overall revenue and remains an important profit driver for the company since being introduced in 2007. The new phone--expected in the second half of 2012--is expected to be powered by the fastest wireless networks, as the new iPad is.
Finally, analysts see growth potential in the company's iCloud service, which synchronizes customer's information such as contacts, calendars and photos across their computers and mobile devices for free. The service--now with more than 100 million customers--could help the company improve its position in the competitive and fast-growing market to control and store users' media holdings.
-By Ian Sherr, Dow Jones Newswires; 415-439-6455; email@example.com