In spite of record top line and bottom line numbers, Apple Inc. (NASDAQ:AAPL) seems to be trading at a huge discount to its true intrinsic value. In order for Apple to grow at a rapid pace the company needs to unveil products that will pave the way for newer revenue trajectories, in addition to existing ones.
Apple still faces a lot of product life-cycle risk as most of its regular users, often possess multiple devices from the company. There are a few big growth opportunities available for Apple going forward.
1. China and the Emerging World
One of the major growth drivers for the company lies in the ability to further tap into some of the emerging markets, with China leading the way. The purchasing power of most consumers are lower on a relative basis, along with the reluctance of many carriers to subsidize phones. Apple faces a problem it doesn’t face in many developed countries.
The company might be able to persuade a handful of carriers in some markets to subsidize the price of these phones in some countries. But almost certainly, most carriers in growing markets will not entertain such arrangements.
As a result, Apple should address this situation with lower priced iPhones and iPads in these countries. It doesn’t have to be the most recent released ones, but more entry level devices.
The company’s margins will shrink due to such measures, but its top line and bottom line will grow substantially as a whole. In its most recent quarter, revenues from Greater China made up only 12.5% of total revenues; this can grow substantially from current levels, if it introduces lower-priced phones.
2. Capture the Enterprise Solutions Market
While Apple and Android-based devices primarily Samsung have been eating away the consumer market rapidly, Research In Motion Ltd (NASDAQ:BBRY) still remains the preferred choice for much of the business world. With the strongest security and user control, BlackBerry is largely the choice of businesses, when handing out phones to their employees.
Enterprises are a lot more concerned about their data and information security, and a lot less concerned about the individual’s inclination to play Angry Birds. BlackBerry has lost some subscribers recently, but almost certainly a majority is from the consumer side, and not from enterprises.
With BB 10, and launch of the new Z10, BlackBerry will likely maintain its grip on the enterprise solutions market tightly. And possibly with stronger network security compared to current levels, Apple can be a stronger force in the enterprise solutions market. However, Apple has to introduce products that have a keypad, along with stronger network security for getting a bigger chunk from Enterprise customers.
3. Newer Innovative Products
The company’s CEO Tim Cook still thinks that Apple has the ability to growth and boost its sales of iPhones and iPads, and rightly so. However, with the rapid pace of innovation in the IT Hardware sector, the company needs to launch newer products.
Apple is widely speculated to unveil a Television set, but hasn’t given any details. Also the iWatch, the utility of which is largely questionable, as consumers especially the younger generation largely do not wear watches at all.
However, Apple can still roll out major consumer-centric products with the huge amount of consumer data it has in its artillery. Its ability to integrate software and hardware with services along with a lot of cash, gives it a lot of flexibility for the introduction of completely new product lines.
Some sell-side analysts are even stating that Apple has the ability to introduce a mobile-based payments system. Mobile-based payments system is a good option, but is already a very crowded space with eBay Inc (NASDAQ:EBAY)’s PayPal and Square holding a large chunk of the market.
4. Growing Apple’s Ecosystem
Apple’s ecosystem of more than 500 million users on iTunes makes up a rather small portion of Apple’s total revenues. However, with such a large and sticky user base, Apple can monetize this group substantially even more from current levels. The iTunes store is already the most popular music store in the world with a catalog of more than 26 million songs, which have been downloaded more than 25 billion times.
Apple can introduce a lot more content from more movie studios to grow its presence even more from the services category. It can grow its existing presence in the video-on-demand streaming presence with a subscription-based offering. It has a huge amount of regular users on iTunes platform who will be very happy to get a monthly subscription for watching movies.
The Bottom Line
Apple’s cash, along with a huge fanatical user base gives the company a edge in introducing newer offerings. And going forward, it should be reasonably be able to offer more consumer-centric products which amaze the fans.
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