The Smart Profits Report: Issue #434
Thursday, June 28, 2007 Apple's iPhone: "iDay" Is Here... Can You Play This New Tech Boom?
By Martin Denholm
Managing Editor, Mt. Vernon Research Will you remember where you were at 6:00 PM on Friday, June 29, 2007? If you believe the hype (and there's plenty of it), a huge day beckons for the tech world. "iDay," and the release of Apple's iPhone. After years in development and months of anticipation, Apple (Nasdaq: AAPL) will launch its vaunted iPhone today. Many folks will actually camp outside stores, just so they can be one of the first to get their paws on the flashy new device. So crank up the hype machine... we've decided to focus on the release of Apple's iPhone and show you that you don't just have to play it by investing in Apple directly... there are other companies hitching a ride on what is expected to be a major boom... Apple's iPhone: Is It Worth The Hype? Uh, okay. I know Steve Jobs and his Appleites have had the marketing machine cranked up to warp speed for weeks now, but is it really worth that much hype? Apple's iPhone itself costs $500-600 (depending on the 4GB or 8GB version). You're then locked into a two-year contract with exclusive carrier AT&T (NYSE: T), with monthly plans starting at $60. Why shell out megabucks now when you can probably get the iPhone for half price in 12-18 months - particularly given the chance of bugs in the first-generation product and the rumor that Apple will release an upgrade in a year or so? Remember what happened with iPods. The 4GB mini was all the rage until the 20GB and 40GB beasts and the nano version took over. The mini became dirt-cheap and is now discontinued. On the flip side, the iPhone is one serious piece of new technology. It's a phone, iPod, e-mail, web browser and camera all stuffed into a nifty device just 11.6 millimeters thick. Talk about consolidation. This could be the standard-bearer for the industry. To cope with demand for the launch, AT&T has hired 2,000 extra staff for its stores and police are standing by to control the baying masses. In fact, the BetUS.com website is offering odds of 20-1 that someone gets trampled trying to get Apple's iPhone. I'll take it! The question is... rather than sit back and watch the madness unfold, how can you profit from what is expected to be a mega boom? I've got a couple of ideas for you... but let's deal with Apple first and see if it's still a good idea to invest in the stock... Apple's 10 Million Sales Target There's no doubt that the Apple guys are masters at creating a buzz around a product. When Steve Jobs revealed the iPhone in January, he boldly proclaimed that, "The iPhone may really change the whole phone industry." Some thought his 10 million sales goal by the end of 2008 was optimistic, too, considering it's the company's first foray into the mobile phone market - and with a so-called "smartphone" that includes several other applications and burgeoning, yet still raw, touchscreen technology. But Apple shares have shot up 35% since January to $120. However, in keeping with our "smart profits" philosophy, if you're thinking about investing, bear in mind that the hype is well priced in and that now might not be the best time to profit. Since June 7 alone, shares have traded between $115.40 and $127.75 - a pretty wide range. The stock is actually overbought and could be ripe for some profit-taking. My colleague and technical wizard Jim Stanton tells me that a close below $115.40 would take the stock down to $110.75 at least. Apple's iPhone now has to match its hype - there's a risk of over-promising, but under-delivering and that expectations are too high - something Apple hasn't had to face before. Not to mention the fact that negative press or iPhone bugs could hit the price. For example, if you put the hype aside, Apple's iPhone is... well, a phone. But there are other investment options... How About These Apples? First, AT&T, the biggest U.S. phone company, has an exclusive iPhone deal for two years. Having invested $16 billion since 2005 to upgrade what some say is a spotty wireless service, CEO Randall Stephenson promises, "iPhone customers will enjoy the best voice and data network in the nation." But he would say that, wouldn't he? Nevertheless, AT&T should receive a boost from its iPhone sales, their monthly plans and the increased visibility that its other products will receive in stores and online, thanks to the hype. Its third-quarter earnings results will be key. AT&T has also signed a deal with Synchronoss (Nasdaq: SNCR) to provide order processing support. With AT&T preparing to welcome a flood of such orders, take a look at SNCR's stock chart and you can see what effect Apple's iPhone hype has had recently. Since its IPO last summer, shares are up 238%. And with an impressive string of earnings reports, iPhone sales could tuck several million dollars in its pocket. One other option is Broadcom (Nasdaq: BRCM). Having already supplied the multi-media chips for video iPods, Apple reportedly asked it to provide the technology for the iPhone touchscreen. With the touchscreen industry growing, this is one company that could profit. But while Apple and the iPhone is all the rage, the company that is leapfrogging all the current touchscreen technology is already in our Xcelerated Profits Report portfolio - and it's one we've already taken triple-digit gains on this year. See today's "Action Center" below for more details... Don't underestimate Apple's iPhone accessories market either - and the companies making products such as cases and clips. According to industry research group NTD, it's a market worth $1 billion. The Smartphone Spillover Effect The buzz from Apple diving into the mobile phone market is expected to affect the rest of the industry and increase the competitive pressure on fellow smartphone manufacturers Nokia (NYSE: NOK), Motorola (NYSE: MOT), Blackberry maker Research In Motion (Nasdaq: RIMM), and Palm (Nasdaq: PALM). These firms are going to have to battle back with upgrades of their own, which will heighten consumer/investor awareness in the industry even more and affect the share prices of those who fare best/worst. It remains to be seen what effect Apple's iPhone will have on market share. Remember, the iPhone is brand new and probably has some kinks to iron out. In addition, the fact that Apple's iPhone is expensive and the projected 10 million sales represents just 1% of the total one billion in annual cellphone sales could give these cheaper and more tried-and-trusted carriers some breathing room. Oh, and one final tip: Steer well clear of Apple and AT&T stores tomorrow! Until next time, Martin Denholm Today's Smart Profits Action Center - Apple's iPhone is the latest piece of cutting-edge technology to hit the market - and the Xcelerated Profits Report team is hot on the trail of this massive, life-changing industry. It's already handed readers triple-digit gains on Immersion (Nasdaq: IMMR) - a major player in touchscreen technology and force-feedback technology, used in cellphones, gaming consoles, medical devices and the auto industry. Could Immersion play a part in future iPhone products? The company's current Chairman of the Board Jonathan Rubenstein worked for Apple from February 1997 to April 2006, serving as Senior Vice-President of the iPod division and Senior Vice-President of Hardware Engineering.
- The XPR team recently added two more flourishing companies with groundbreaking technology to the portfolio. To find out how you can cash in before it's too late, please click this link.
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