Apple on its Way to $1,000
Moustafa is a member of The Motley Fool Blog Network -- entries represent the personal opinion of the blogger and are not formally edited.
As Apple (NASDAQ: AAPL) creeps past $600 it seems the tech giant has only one way to go, and that is up. The sounds of bears murmuring in the background became louder as Apple corrected downwards after surpassing the $600 plateau earlier this year, but those murmurs have died down and a feeling of anticipation remains.
The tech landscape has two once-large players in Nokia (NYSE: NOK) and RIM (NASDAQ: BBRY) who are living examples of what happens when innovation in the market surpasses innovation in a product. One of the major concerns after Apple had initially surpassed $600 was the idea of what they could do to keep the momentum going. Nokia allowed the smart phone market to grow much too quickly before they attempted to enter it, while RIM thought that their tech was too good to be out innovated and got complacent. The answer to how Apple could keep their momentum seems to be two major factors: upgrading and modifying their existing product lines and continuing to expand in China.
Apple has taken a decidedly different approach to consumer electronics compared to almost any other company that produces electronics, computers or tech gadgets. When Sony (NYSE: SNE) revolutionized the handheld portable tape players with their release of the Walkman, they came out with a myriad of different versions, colors and price points. Samsung makes tens of different types of phones, TVs, DVD players and most anything else they are into. Nokia and RIM had a sometimes confusing number of product offerings that become very confusing. It was thought that to appeal to the broader market you would have to have something for everyone.
Where Apple has changed the game is in the simplicity of what they offer. They offer one phone, one media player and one tablet. They offer a range of memory capacities and in their tablets, you can choose from Wi-Fi or 3 and now 4G. Most of their products come in two colors and have a few stock applications. Their genius was allowing developers and customers to personalize their products with covers, cases and apps.
This simplicity allows them to keep what they offer very simple, and when a new product is coming out it is simple to convey improvements on the previous generation. This keeps their customers upgrading their products at a never before seen pace. The rumors of Apple offering a smaller iPad -- dubbed the iPad Mini -- has not surprisingly caused more excitement and I am sure a little bit of nervousness in Amazon, who heavily invested in bringing their popular Kindle Fire to market. There is no doubt in my mind that the iPad mini will be a runaway success as it will be priced at a point that will allow many more customers to adopt the iPad. They are also updating the iMac and as laptop prices have tumbled and price competition is intense, Apple has been able to continue to charge over $1,000 for their machines.
This brings us to the second part of Apple’s formula for continued success. We have all heard of the reports published in mainstream media of the fervor that Apple elicits in the Chinese market. They have only begun to break into the market and monetize the ever-increasing middle and upper class in China. The growing market in China as we all know is more than triple that of the United States and provides them with an incredible potential to continue to grow their bottom line. China has always been and in at least the near term will continue to be a very fickle place to do business. Small missteps can cause wide spread rejection of a brand and even more importantly it can raise the ire of the government, which can quickly get you booted from the market regardless of who you are -- just ask Google. Apple has done a great job navigating the Chinese market and has set themselves up to succeed. Apple has continued to increase its presence in China and with the iPad mini on the potential horizon the story keeps getting brighter.
Apple has with their combination of simplicity, quality and innovation positioned themselves on the top of the tech mountain. The momentum that many saw stalling a couple months ago was a fear-based reaction to a disbelief that Apple will continue to succeed. There are no guarantees in the investing world and Apple does face stiff competition from the likes of Google and Samsung, but with what they have already on the market and the upgrades in the works, Apple I think will easily be a $1,000 a share stock in the next 3 to 5 years.
I own shares of Apple and RIM. The Motley Fool owns shares of Apple and is short Sony (ADR) and has the following options: long JAN 2013 $22.00 calls on Sony (ADR). Motley Fool newsletter services recommend Apple and Nokia. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. If you have questions about this post or the Fool’s blog network, click here for information.
