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Apple (AAPL): Multiple Catalysts Remain For Tech Giant

 May 30, 2012 01:07 PM

(By Mani) Shares of Apple, Inc. (NASDAQ:AAPL) have declined to $570 from $630 levels in April, and the recent pull back in prices creates an attractive entry point for investors to benefit from Apple's ability to sustain material revenue and EPS growth over the next several years.

Apple shares, which are expected to touch $700 before the end of 2012, could benefit from multiple catalysts including an iPhone 5 launch likely in September/October, a Macbook refresh likely late in the second quarter, potential iTV launch, and sustained momentum from iPad in June quarter and beyond.

Since the initial iPhone launch in 2007, Apple has continued to out innovate and maintain its first mover advantage in the market place, creating headwinds for companies like Research In Motion (NASDAQ:RIMM) and Nokia (NYSE:NOK).

[Related -Apple Inc. (AAPL): June Quarter Revenue Under Microscope After Weak March Guidiance]

"Notably, we believe AAPL still has room to continue seeing market share gains as they target international markets over the next several years," RBC Capital Markets analyst Amit Daryanani wrote in a note to clients.

Meanwhile, Apple targets the international market by partnering with more carriers coupled with launching smartphones at multiple price points to drive broader adoption. Specifically, emerging market penetration continues to remain a key and material revenue driver for the company over the next several years.

[Related -Apple Inc. (AAPL): How Q1 Earnings Will Fare?]

Apple's key strength is its unique computing ecosystem – iOS, which provides users with an integrated, scalable and seamless experience across multiple devices, something would be difficult to replicate in scale for competitors.

Simplistically, the scale of users attracts application developers, which in turn bolsters the number of users, and this cycle results in a captive consumer base that transitions more data and usage via iOS on Apple devices.

While the benefits of integrating and developing hardware and software simultaneously are well recognized with Apple, enabling the technology giant to go after a substantially larger profit pool versus its peers.

"Simplistically, rather than just targeting the hardware layer, AAPL is able to capture incremental profits by also being the OS developer, processor manufacturer and in instances the retailer of the product," the analyst added.

In addition, Apple has multiple levers ahead of itself that drive further revenue acceleration, and success and growth in Enterprise markets will open up a stickier and higher margin segment. Not to mention, the new products such as iTV  would further expand Apple's revenue opportunity and profit potential.

The recent comments from Apple's Chief Executive Tim Cook imply that Apple is working on some interesting devices and intensely focusing on the television space.

Tim Cook, in an onstage interview Tuesday at a technology conference in California, said technology for televisions was of "intense interest" but stressed the company's efforts would unfold gradually amid speculation that it was on the brink of unveiling a revolutionary iTV. Piper Jaffray analyst Gene Munster said Apple is working on a TV that may be unveiled this year, and released in 2013.



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