Investors Get ‘Antsy’ For New Apple Products
Weaker-than-expected iPhone sales are putting more pressure on Apple to come up with new products in large new categories.Late Monday, Apple reported 51 million iPhone unit sales in its latest quarter, about four million shy of Wall Street forecasts, knocking its shares. Samsung, Apple’s main rival, also reported weak sales numbers recently, suggesting the high-end smartphone market is becoming saturated.
Apple CEO Tim Cook told analysts in a conference call that new products are coming in 2014. But for Wall Street, the results mean new products are needed sooner rather than later
“Investors are getting antsy,” Steven Milunovich, an Apple analyst at UBS, wrote in a research note on Tuesday.
Tony Sacconaghi, an analyst at Bernstein Research, sees the most material impact from a new, larger iPad designed to be used at work.
“The imperative for new product categories — which CEO Tim Cook stridently reaffirmed would occur ‘this year’ — is at an all time high,” Sacconaghi wrote in a note to investors.
Apple will not move down market with cheaper smartphones, a route that Samsung may take, Tavis McCourt, an analyst at Raymond James, said.
“They’ve taken the iPhone to maturity because most of the high-end customers buy this device, so Apple’s job is to move on to a new product and the next category,” he added.
The four main areas for Apple to expand into are wearable technology such as smartwatches, TV, mobile payments and home automation, according to Gene Munster, an analyst at Piper Jaffray.
Apple shares have fallen from more than $700 to close to $500 in recent years. They are now cheap compared with other large companies, but the stock may not rebound until the company unveils at least one or two of these new devices.
“It’s been in this lull for a long time now. This is the year they are going to re-vamp their product line up,” said Jason Jones of tech hedge fund firm HighStep Capital, which owns Apple shares. “There’s a lot riding on this year, especially for Tim Cook who needs to show the world that he has some innovation up his sleeve.”
Entering the TV market is the obvious next step for Apple because that market is large enough for a company that will soon be generating $200 billion a year in revenue, McCourt said.
In a recent letter to Apple shareholders, activist investor Carl Icahn listed TV as the first in a list of new categories that the company may enter. New ultra-high-definition technology may trigger a new wave of TV buying — creating an attractive moment for Apple to enter the market, Icahn and McCourt argue.
With 238 million TVs sold globally in 2012, Apple could sell 25 million new ultra-high-definition TVs at $1,600 per unit, Icahn said. At Apple’s recent gross profit margin of 37.7%, an Apple TV may add $40 billion of revenue and $15 billion in operating income a year, Icahn estimated.
McCourt said it would be difficult for Apple to generate such juicy profit margins from a TV. However, the price of such devices are a lot higher than smartphones and tablets, so the company’s actual profit dollars could climb, the analyst said.
The company is reportedly close to unveiling a new version of its Apple TV product, which is a small set-top box that lets users stream video from the Internet to their existing TVs.
The new Apple TV box may include the ability to play games, according to tech blogs Apple Insider and iLounge. Apple spokesman Steve Dowling declined to comment on plans for future Apple products.