What's In (The) Store For Apple?

By Mark Morelli - August 24, 2012 | Tickers: AMZN, AAPL, BKS, GOOG, TWC | 0 Comments

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So what will be in the Apple (NASDAQ: AAPL) store this fall and winter?

You might get a few hints from the big media event Apple has scheduled for September 12th. Many knowledgeable people claim that one announcement will be about the upcoming release of the next version of the iPhone. The talk is based upon the guidance the company issued at its last earnings call on July 24 plus scrutiny of key suppliers. Hon Hai, their primary contract manufacturer, for example, reported a 5% year over year increase in sales in July. Typically Hon Hai sales are flat during the summer.

A tablet with a smaller screen size, the iPad Mini, may also be announced. The lower price of the Mini is expected to allow it to compete with the Amazon.com (NASDAQ: AMZN) Kindle Fire, the Barnes and Noble (NYSE: BKS) Nook and the Google (NASDAQ: GOOG) Nexus 7. Apple now controls neaarly 70% of the tablet market with the regular version of the iPad. Expect that number to go up as the size goes down. 

An update to Apple's mobile device operating system, iOS, without the YouTube and Google Maps apps, and a new line of iPods are expected to be announced too. 

The elephant in the room, however, will be how Apple will enter the TV business. Will there be a stampede? Some techies say that an Internet-enabled TV, the iTV, is already in production as activity is increasing at Hon Hai, Sharp and other component manufacturers. Reports from the Wall Street Journal indicate that Apple wants to develop a set-top interface to replace the current box that cable TV companies provide.

More critical to success than the actual hardware and software innovation, Apple is engaged in talks with cable and entertainment providers. For example, CEO Tim Cook has met with executives of Time Warner Cable Inc. (NYSE: TWC). Companies like that need to buy into a "point and click" entertainment ordering system. Sounds a lot like the talks Steve Jobs held with the shakers in the music industry right before the iPod and iTunes came on the scene about a decade ago. Will Tim Cook be just as successful? If he is, Apple could conquer another aspect of our world. However, this probably will take some time to happen.

There probably won't be a big bump for the fiscal quarter which ends on September 30th. In fact earnings could disappoint again as most people are probably holding off and are waiting for the new gadgets. The consensus estimate is for earnings to be about $8.32 per share. Apple announced earnings of $9.32 per share on July 24, lower than most analysts expected.

However, things could be different in the October to December period and beyond.  One analyst said earnings could grow to over $64 per share for fiscal 2013. He raised his target for the stock to $900 per share. Yikes. The closing price on August 17 was about $648, just below the all-time high set earlier in the day. 

For a perspective please refer to the chart below which shows a steady progression of earnings growth (and the stock price) over the last few years. The earnings per share is shown in green bars and the stock price as the blue line. Can this trend continue or accelerate? I think it's possible if the new products are as successful as the previous versions and entry into the entertainment industry is a hit.

So this fall or winter, when you go to your nearest Apple store, expect to see enhanced versions of several best selling devices that the world already loves and possibly a completely new one. It may not be too late to get in on Apple and take advantage.

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