Apple Inc. (NASDAQ:AAPL) released its earnings report for the September quarter earlier this week. The company showed a positive earnings surprise, but the result did not seem to impact the stock positively. The firm’s shares are down a fraction since the start of the week. In a new report, BGC’s Colin W. Gillis shares some ideas about the future of the company.
Gillis begins the report with a summary of Apple Inc. (NASDAQ:AAPL)’s prospects in haiku form: “Upside catalysts, are dwindling for Apple, as news hits the tape.” He rates the company at Buy despite the pessimistic nature of his opening verse. The only remaining catalyst is, according to Gillis, the addiction of the world’s largest carrier, China mobile, to the Apple books.
According to Gillis, the one remaining catalyst is adding “China Mobile – the world’s largest carrier with over 700 million subscribers to the list of carriers that sell the iPhone.” Apple Inc. (NASDAQ:AAPL) has been linked with a China Mobile Ltd. (NYSE:CHL) deal for a long time, but it has not materialized yet. Analysts are predicting that the deal will come through toward the end of this year or the beginning of 2014.
If Gillis is right, that is the last material upside that investors can expect to come for Apple Inc. (NASDAQ:AAPL)’s stock for the quarter. The analyst is still positive on the prospects of Apple Inc. (NASDAQ:AAPL), and was slightly impressed with the results the company posted in its most recent report.
The lack of an upside in Apple Inc. (NASDAQ:AAPL) shares has been a theme in the movement of the stock for the last year. For the full year 2013 so far the stock has lost just over 1.5%. Investors are nervous about the company’s future, and they’re unsure about where the company will find itself in five years.
Gillis puts a price target of $550 on Apple Inc. (NASDAQ:AAPL) shares with the upside from adding China Mobile Ltd. (NYSE:CHL), the most important thing for the company’s medium term future. Apple will need to show investors that it can add value to the company in order to spur shares. The addition of a new product line is the most often requested change, but there are other things Apple could do to bolster value.
Carl Icahn is looking for the company to buy back $150 billion worth of shares, and some are calling for Apple Inc. (NASDAQ:AAPL) to add value to the iPad range by pushing the product at an enterprise level. Sales of the tablet are leveling off as the device faces competition from Android and Windows tablets.
Apple Inc. (NASDAQ:AAPL) is doing incredibly well, but it is not the company’s current performance that investors are worrying about. The firm’s gross margin is shrinking, and the iPhone is facing tougher competition every year.
Apple upside on the way
Apple Inc. (NASDAQ:AAPL) has certainly become a company more focused on its shareholders in recent years. The firm is careful about the way it treats them, and it has even treated activist Carl Icahn with courtesy. The firm will not deliver a new product before it is ready, but it almost certainly has new products on the way.
An Apple smart watch or an Apple television are the most likely products for 2014 according to analysts. The same analysts were predicting a couple of new product launches in 2013, however.
Apple Inc. (NASDAQ:AAPL) will try to add value to its stock, but in the medium term there appears to be little upside in the firm’s shares. If Apple makes a deal with China mobile there may be a bump, but there’s little else for investors to hope for through the year’s end.