Ok. I may not be the first person to point this out, but Apple Inc. (NASDAQ:AAPL)
is pretty cheap at 10 times trailing earnings. But a low P/E ratio
isn’t enough. Investors must identify a potential catalyst to justify a
higher multiple. Apple Inc. (NASDAQ:AAPL) needs to dangle something new and shiny in front of analysts to get them excited about the stock again.
Fortunately, Apple has several potential catalysts in every quarter of 2013 that can drive its share price higher.
Spring Dividend Hike
In its most recent quarterly earnings, Apple Inc. (NASDAQ:AAPL)
reported that its cash pile reached a record $137.1 billion. Currently,
the company pays a $2.65-a-share quarterly dividend, with the stock
yielding about 2.4%.
Many analysts believe the company could hike its dividend in April. Conceivably, Apple Inc. (NASDAQ:AAPL)
could double its payout with little impact on cash available to finance
operations. If Apple were to shell out such a massive cash
distribution, it would push the stock’s yield north of 4%. Like feeding
candy to a child, any dividend hike would provide a quick sugar rush for
Wall Street.
Summer Product Releases
Of course, a healthy diet requires more
complex carbohydrates. Analysts want to see new products that can propel
revenues and profits higher.
The company recently refreshed its
product line, with modest updates expected in 2013, including new chips
and software updates. These efforts will begin to appear in Apple Inc.
(NASDAQ:AAPL)’s first- and second-quarter financial results.
Rumor mills are buzzing about several upcoming handset releases:
iPhone 5S
: Expected to be launched in June, the follow up to the iPhone 5
will feature multiple color options and be available in two different
sizes.
Low-Cost iPhone: Ealier this month, the Wall Street Journal reported the Apple is preparing to release a cheaper version of the iPhone. The move would allow Apple to penetrate emerging markets where cheaper handsets are more prevalent.
iPhone Math
: There’s also speculation that Apple is developing a new-larger
screen smartphone which could be released in 2014. The new phone takes
direct aim at the Samsung Galaxy featuring a larger 4.8-inch screen
display.
Fall China Mobile Ltd. (ADR) (NYSE:CHL) Deal
It was widely reported that Apple CEO Tim Cook met with China Mobile Ltd. (ADR) (NYSE:CHL) executives last week, indicating that a deal with the carrier may be back on the table.
Apple has struggled to gain a foothold in China primarly due to competition from Google Inc (NASDAQ:GOOG)'s
Android operating system. While Android lost its No. 1 spot in the
United States last month, the platform has dominated the Chinese
smartphone market. Last year, sales of Android-powered devices increased
260% year over year. Android grew its market share by 19%, now accounts
for 72% of all device sales in the country.
Why has the Android OS been so much more
successful in China and other emerging markets? The platform's ad
subsidy makes handsets significantly cheaper for price-sensitive
customers in developing economies.
While it would appear as if nothing can
stop the Android onslaught, a deal with China Mobile could reverse the
iOS's market share slide by giving Apple access to a 700
million-subscriber base and up to 65% of Chinese smartphone customers.
Of course, the Apple/China Mobile deal faces challenges, which Foolish blogger Reuben Brewer detailed here.
China Mobile is using its huge subscriber base as a negotiating ploy to
grab a generous handset subsidy or a share of app revenues. But
expectations are set pretty low for this deal’s outcome. If Tim Cook can
negotiate a reasonable bargain, it could be a huge boost for the stock.
Winter OMG Product
The biggest criticism from analysts is no new ‘Oh My God’
product in Apple's pipeline. Management has remained tight-lipped about
its R&D projects, but there are clues that something big is in the
works.
Last year the Wall Street Journal reported
that Apple was in negotiations with television service providers and
content producers, suggesting that a new iTV is in development. More
recently, reports have surfaced that Apple is working with Asian component suppliers to test parts for television sets. Industry
analysts believe the iTV could revolutionize the television experience
with a cloud-based DVR, social sharing features, and an icon-based user
interface.
Foolish Bottom Line
Unfortunately, all of the above
catalysts remain rumors and Apple shares will continue languish until
management provides Wall Street greater clarity about the company's
future.
Analysts need to see answers to the
following two questions before the stock can gain traction: 1) How will
Apple counter competitive threats from Google's Android OS and the
Samsung Galaxy? 2) Does the company have something big in the product
pipeline? While there are clues something positive is in the works,
investors should look out for answers to these questions in upcoming
quarters.
The article 4 Catalysts That Could Reignite Apple in 2013 originally appeared on Fool.com and is written by Robert Baillieul.
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Source: Insidermonkey