Apple Inc. (NASDAQ:AAPL) sits on a massive business expansion opportunity, which is wrapped beneath its iPad devices, and the future of the digital world. The company boasts one of the best integrated business models, with its vertical integration, which allows it to produce both the devices and software, unlike its major competitors. This gives it a massive opportunity, when it comes to product development, in the sense that, it can make product updates and enhancements without relying on its partners, apart from the case of iPhones, where the tech giant needs to rely on carrier networks.
Media and analysts have been speculating on Apple’s next big thing, with some suggesting that Apple TV could form Apple’s could be the next force in Apple’s product line. However, Barclays PLC (LON:BARC) (NYSE:BCS) Equity research analysts have a different view. The analysts set their focus on the most unexpected gadget, the remote, and emphasis that this is where Apple’s future in home entertainment lies.
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The analysts believe that, Apple Inc. (NASDAQ:AAPL) could gain more by focusing on expanding its total addressable market (TAM), around its current product line, as compared to developing an entirely new product. The analysts are of the opinion that the iPad is the gateway to Apple’s next big thing, as they see the device being one without limits, given that it does not rely on carrier networks or other companies in its business.
The iPad can be easily upgraded to control more tasks in life, and a good example is how the device has cannibalized the PCs and laptops industry, by virtually taking over the whole business. Currently, you can use the iPad to edit documents photos, videos, as well as directional maps.
Apple’s iPad has not been as successful as its counterpart, iPhone. Statistically, Apple Inc. (NASDAQ:AAPL) has shipped approximately 84 million iPads since inception, as compared to about 400 million iPhones. The main predicament has been pricing given that, unlike iPhones, there are usually no subsidies for purchasing a device on a certain carrier network. The iPads are sold independently in any case.
However, the introduction of the iPad mini, which analysts expect, an announcement sometime this month, would seem to solve part of this quandary by it affordability. Analysts believe that the 7″ iPad mini will be quite affordable as compared to the other 9″ plus, iPads.
Currently, iPads can be used to send content to TV wirelessly via Airplay, as long as the TV has an Apple TV attached to it. Importantly, Airplay enhances the use case for any iOS device – along with Apple’s “remote” app, note Barclays Equity analysts. The analysts add; “We believe Apple Inc. (NASDAQ:AAPL) should really evolve this vision further with iPads acting as a “central command” for the digital home”.
The current setup is that iPad owners can use their TVs as iPad monitors, with the iPad acting as a virtual keyboard, while the TV, displays everything that is done on the iPad. Nonetheless, with Apple’s iCloud, the analyst earmark that, there is no reason why, Apple “wouldn’t eventually allow an iPad to be an interface for the TV – to perform basic computing tasks with a virtual keyboard like, checking emails and calendars, surfing websites, editing your PhotoStream and even chat with iMessage,” said the analysts.
Eventually, the iPad could become the center of home entertainment just the same way the iPod uses iTunes. Additionally, the analysts bring in TV ownership in North America, which they estimate at around 360 million. If the iPad maker is able to forge traction in what is being termed as TAM expansion, with its iPads, then the analysts believe that the company could ship at least 100 million iPads in the next few years. At an ASP of $350 per iPad, then this could result into about $12 incremental earnings per share.
Notwithstanding, Apple Inc. (NASDAQ:AAPL) still faces the predicament of addressing its maps issues, as well as compatibility of its new iPhone 5 connector with third party accessories and adapters. The analysts have withheld their overweight rating for the stock as well as the neutral perspective for the industry. Their price target for Apple Inc. (NASDAQ:AAPL) is still $810 per share.
At the time of this writing, Apple Inc. (NASDAQ:AAPL) stock was trading at, $630 per share, down $8.17, or 1.28% decline form yesterday’s close.