Apple Inc. (NASDAQ:AAPL) is testing prototype designs for larger screen iPhones according to a report from The Wall Street Journal yesterday. The company has been criticized for not keeping up with the major growth trend in the smartphone market in the last couple of years. Apple Inc. (NASDAQ:AAPL) is going to have to bring something big to compete according to Cantor Fitzgerald.
A new report from the research firm, authored by analyst Brian White, suggests that a large screen iPhone would be a good move for Apple Inc. (NASDAQ:AAPL), but there is demand for something different, particularly from China. Mr. White’s prescription is the creation of an “iPhad.”
Apple and the iPhad
The Wall Street Journal article that confirmed the testing of larger iPhone screens indicated that Apple Inc. (NASDAQ:AAPL) was working with screens from 4.8 inches up to 6 inches. The 6 inch model, according to Mr. White, is a little outside the iPhone range, bit it could form the base of an iPhad.
The phablet, a cross between a phone and a tablet, is one of the more surprising trends in tech in recent years. The devices are essentially phones, but with much beefier specs, boasting bigger processors and much bigger screens. The Cantor Fitzgerald report indicates that these phones are particularly popular in China, where they are seen as a fashion statement.
Apple Inc. (NASDAQ:AAPL) has been talking up the Chinese market for years and it was way ahead in east Asia, before it fell way behind. If Apple Inc. (NASDAQ:AAPL) wants to catch up, it may have to bury its distaste for massive screens and serve up an iPhad. If it doesn’t, one of the fastest growing market segments could be alienated.
Apple growth imminent
Cantor Fitzgerald sees the experimentation at Apple Inc. (NASDAQ:AAPL) as a good thing, and is predicting that the company’s stock price will grow in the year to come. The analyst put a twelve-month price target of $777 on the company’s stock. That number is based on very high sales from the iPhone 5s and iPhone 5c, as well as a multiple Apple Inc. (NASDAQ:AAPL) hasn’t seen in a long time.
Cantor Fitzgerald values Apple Inc. (NASDAQ:AAPL) with a 14x multiple and then adds the company’s cash holdings on top. At the moment, Apple Inc. (NASDAQ:AAPL) is trading at a multiple of close to 12, including the entire value of its cash.