AAPL! AAPL! AAPL! Buy! Buy! Buy!


Photo: Jim Merithew/Cult of Mac
Photo: Jim Merithew/Cult of Mac

Sell the house. Sell the car. Sell the kids. Take every penny you own and invest it in Apple stock, because the company is about to go gangbusters.

The big news from yesterday’s earth-shattering earnings call is that this is a company that is extremely confident about its financial future.

Apple has come under fire recently for not innovating. You’ve heard the whining: Apple’s lost its mojo. There have been some nice updates to existing products, but Apple’s done nothing lately to realign the universe. It’s been four long years since it’s last biggie — the original iPad. Where’s the latest product that reshapes the modern world?

To many observers, it looks like the company has been treading water in the two-and-a-half years since Steve Jobs’ death. Android is seating Apple’s lunch, and Apple’s got nowhere to go but down. Apple’s over.

But that narrative is nonsense. Wednesday’s earnings call — and the gobsmacking 7-to-1 stock split — clearly telegraphs that Apple’s executives have something huge up their sleeves. Maybe a couple of things. Maybe a lot of things.

If you’ve been paying close attention to the news and rumors, 2014 looks like it’s shaping up to be Apple’s biggest year in decades.

Apple’s stock split is a big deal. Seven-to-one stock splits are fairly rare (two-to-one splits are the most common). But not only is the stock getting a big split, Apple is investing an enormous $130 billion in buying it back. The stock is “significantly undervalued,” said CEO Tim Cook with characteristic understatement.

Without the buyback, investors would undoubtedly have been spooked by such a gigantic split, which dilutes the pool significantly. But with Apple pumping such enormous sums into the market, it’s a gigantic win for investors.

Why such a large split? Apple says it’s to make the stock more affordable to a larger pool of investors. The price will drop from about $525 per share to about $75 per share. Individual investors may balk at paying upward of $500 for a single stock but would be probably be happy to buy handfuls at $75 a pop.

Some on Wall Street think this is foolish, and will attract investors who aren’t committed to the long-term health of the company. But to me it says that Apple is supremely confident about the stock’s potential value. Apple has only split its stock three times in the past, and always at a 2-to-1 ratio. “That should show you how much confidence we have in the future of the company,” Cook told The Wall Street Journal in a rare post-earnings-call interview.

Despite the handwringing about the lack of new product categories, Apple is an extremely healthy company. Its Q2 2014 was the company’s biggest non-holiday quarter ever, and it followed the record-breaking 2013 holiday season, which saw new sales records for iPhones and iPads. Apple’s sitting on $150 billion in cash, and profit margins are still in the 30 percent range, despite popular lower-cost products like the iPad mini and iPhone 5c, which dilute profits. Even the venerable Macintosh is gaining market share, growing in the last 31 quarters when the overall market for computers has been shrinking by double digits.

But what’s coming up is what’s really exciting. None of this is official, but a close read of the rumor mill strongly hints that Apple is coming up with at least two major product categories this year. Maybe four major categories, or possibly even six.

Cook said so himself, declaring onstage at AllThingsD, “We have several more game-changers in us.”

Apple’s next big things?

Here’s what could be coming down the pike.

Phablet iPhones: iPhones with larger screens are all but guaranteed this year. Consumer interest in phablet-size iPhones is off the charts, and there are too many leaks for such devices not to be pending. If and when Apple releases bigger iPhones — and they are all but a lock — they are going to sell like proverbial hotcakes. The cliche will be updated to “selling like iPhone Sixes.”

New Apple TV: Apple certainly has some kind of new television experience in the pipeline, one that is very different from the current Apple TV. The hardware is unclear, but rumors point to a significant UI redesign and an App Store that includes games. On the content side, Apple has picked up former Hulu executive Pete Distad to handle negotiations with content companies for the Apple TV. It’s rumored to arrive in September or October.

eCash: Say goodbye to your wallet. Apple is getting serious about mobile payments. It already has TouchID, which offers limited payments through the iPhone 5s fingerprint scanner. The company has been recruiting experts in the field and already has a huge head start. During Wednesday’s earnings call, Apple said it already has a whopping 800 million iTunes accounts (many of which are linked to credit cards). It’ll soon be 1 billion. By contrast, PayPal has about 100 million customers and Amazon about 160 million.

Health monitoring and management: The combination of a yet-to-be-confirmed Healthbook app in iOS 8, as well as the long-rumored iWatch health wristband, will launch a new category of health monitoring and management.

Acquisitions and new hires: Apple has acquired 24 companies in the last 18 months, Cook revealed on Wednesday’s call. It’s also snapped up a bunch of great talent, including several designers with expertise in textiles and advanced fabric-manufacturing techniques for Jony Ive’s design team. Perhaps the most important hire is Angela Ahrendts, the former CEO of British fashion house Burberry, who takes charge of Apple’s retail stores next week.

Huge capital investment: Apple has plowed billions into factories during the last three years. The last time Apple spent money like this was in the late 2000s, when it switched most of its devices to sleek, unibody designs. Part of this investment is a huge new Sapphire plant in Arizona that’s going to make screens for hundreds of millions of devices.

I’m not an investment adviser and this should all be taken with a pinch of salt. But the clues indicate Apple is up to lots of big things, and some of them will come to fruition this year. It all fits Apple’s established pattern: Take fractured markets (like health, wearables, biometrics and eCash) and make them easy and coherent. And most importantly, make them part of Apple’s tightly integrated digital ecosystem.

That means more new Apple converts, more long-term Apple customers and, ultimately, more dollars dumped atop Cupertino’s giant pile of cash.

Even though Apple’s stock soared in after-hours trading following Wednesday’s call, now is the time to get invested. Like Cook says, it’s an undervalued stock — even as it continues its rise, it’s still a good buy.

If I were you, I’d be robbing the kids’ piggy banks, selling blood and digging under the sofa cushions to get in on Apple’s next big things.

  • DoctorK

    Splitting a stock doesn’t dilute anything, any more than changing a $20 bill into four $5 bills diluted the amount of money in your wallet.

    • aardman

      Yeah, that was kind of an embarrassing statement Mr. Kahney. Let’s blame the uncharacteristic flub on a late night shall we?

    • skeptic52

      And plowing earnings into stock buybacks is a manipulation to improve future earnings/share. Or another way to say it is they can’t think of a better way to add shareholder value than spend the $130B on that.

    • JK81

      Yea, sounds like the author doesn’t know what he’s talking about. Dividends and stock buybacks mean that in mgmt’s perspective there is less expected return in reinvesting that cash back into the business, hence they are returning them to investors this way. Although Apple’s cash pile was way too large for them to reinvest all of it anyway, increasing buy back/div actually means the opposite of what the author is implying about excitement about Apple’s future PRODUCT innovation potential. Yea, and also that dilution thing about the stock split.

  • JJ

    quick question, what app is being used to view stock on the image?

    • Yuan François

      Google Stocks

      • JJ

        That’s not a native app tho, right? But rather viewed through the browser?

      • Jim Merithew

        Yes, just a screenshot of the stock from the browser window.

      • Randall Greenwell

        That is one sweet illustration.

  • aardman

    Think about it. Nike, after years of building the product line, pulled out entirely from biometric hardware. Have you ever seen anything like it? It’s like WWII hasn’t even started yet and France has already surrendered.

    Did Apple share their wearables roadmap with Nike’s CEO? Is the sky blue? This iWatch thing –it’s going to be BIG. Bigger than what most pundits, bloggers and stock manipulators think is reasonable to imagine. It’s not just one or two devices, it’s going to be a whole infrastructure that will drastically expand Apple’s platform, ecosystem and addressable product space. Most of the people writing about Apple’s wearables foray are focusing on the peanuts when they should be thinking about the whole circus that’s being built to sell those peanuts in.

    Aside from the Nike thing, here’s another key indicator: They’re hiring people (search term: Divya Nag) who know how to work with the FDA! How to shepherd products through the FDA approval process. (Isn’t ‘Nag’ just the perfect name for someone who shepherds products through the FDA?) You think Apple would do this for a couple of measly devices? They’re building a whole integrated infrastructure for high tech health and medical devices. (That happen to be damn fashionable.)

    Folks you ain’t seen nothing yet.

    • JDSoCal

      In fairness, France did surrender in like 3 days.

  • stefnagel

    Next big thing? Apple’s next big hit will be its one billion credit card carrying users globally. At a billion self selected, continuously connected users, quantity transmutes into quality. That is, Apple becomes a new species of organization. It’s superscale, high tech, and high touch. Nobody has been there before.

    Apple will continue to do more with less, with a few precisely tooled and purposed products; it cannot be a carpet bomber like Samsung. Apple’s design vectors have always been smaller, lighter, thinner, as well as faster, brighter, and yes funner. One button, not two. More with less. Jobs’s way.

    Now Tim Cook’s video this week signals that Apple is well aware of its role on the world stage. Better. Not better than Samsung. Better for all of us. Not more with less. Better with less.

    Cook’s way.

  • herbaled

    You should have bought Apple stock before yesterday … it’s went up over 8% since then. Oh yeah … all those expert pundits said it’d go down. Silly boys.

  • AAPL_@_$101_Is_A_Done_Deal_:)

    ****Sell the house. Sell the car. Sell the kids. Take every penny you own and invest it in Apple stock, because the company is about to go gangbusters.****

    I remember Andy Zaky saying the exact same thing in mid 2012 and he cost loyal Apple investors millions of dollars. Don’t be greedy. Don’t be expecting some cosmic slingshot. Sure, buy Apple if you want but going all in seems rather risky because the stock market isn’t all that rational. I certainly hope Apple does well and the share price rises back to $700 but I wouldn’t stake everything I have on that happening.

    If Apple ever decides to go into mobile payments, then I suppose the sky’s the limit on Apple’s share price. With all those credit card available, it would give Apple major market share in mobile payments. Wall Street simply loves companies with major market share in anything. I hope Apple takes its time and works everything out before jumping into mobile payments.

    • JDSoCal

      Zaky was wrong so everyone else is wrong? What about the people who predicted AAPL would go up dramatically in 2008? They were right.

  • JDSoCal

    “Without the buyback, investors would undoubtedly have been spooked by
    such a gigantic split, which dilutes the pool significantly”

    What does this even mean?