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Last Friday, I was invited back on CNBC’s Closing Bell to square off with Bert Dohmen of Dohmen Capital.
The topic? The outlook for shares of the world’s largest company, Apple (AAPL).
The stock has been range-bound for most of the year, trading between $500 and $550. I don’t expect the sideways trading to last much longer, though.
To find out why, all you have to do is click on the image below.
As I shared during the segment, I expect Apple to make a major splash into the mobile payments and wearables markets. Both promise to drive sales and profits materially higher. And the stock is bound to follow suit.
Now, I already provided all the evidence behind my mobile payments prediction. As far as the move into wearables, once again, patent filings provide the proof of Apple’s intentions…
- In April 2013, the U.S. Patent and Trademark Office published three patent applications from Apple (#20130085711, #20130085677 and #20130085700). All three relate to improving the accuracy of pedometer readings in mobile devices – a key function for any wearable.
- Fast forward to February of this year, and Apple was granted a patent (#8655004) for headphones that can detect head gestures and monitor the wearer’s activity, temperature, perspiration and heart rate.
- A few weeks later, and another patent application (#20140074431) for “wrist pedometer step detection” was made public. It reveals that Apple is now honing in on a location for the wearable. Since it’s the wrist, the new tech might be an iWatch – or maybe a souped-up fitness band. Time will tell.
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Clearly, Apple wouldn’t be filing for patents – and refining technology that’s essential to a wearable device – if it didn’t intend to ultimately enter the market.
In terms of timing, it couldn’t be more perfect. I say that because, based on the latest research out of Canalys, the wearable market is expected to grow by “mammoth proportions.”
In terms of smartwatches, the firm expects five million units to be sold this year, up from only 330,000 in 2012.
As for “smart bands,” the firm expects shipments to top eight million this year, over 23 million in 2015 and over 45 million by 2017.
“Though currently a relatively small market serving fitness enthusiasts, wearable bands represent a massive opportunity in the medical and wellness segment,” says Canalys. Indeed!
Apple has proved this time and time again… It doesn’t have to be the first-mover in the market to end up dominating the space. Especially since it can leverage its loyal user base to instantly gain traction.
An analysis by Trefis suggests that a move into wearables could add about $50 billion in value to Apple’s market cap, or about $50 per share.
I think it’s a tad premature to make any such calculations, at least until we get a clear picture of the wearable product price points.
Nevertheless, the conclusion is the same…
If Apple enters the wearables market this year, as I expect, the move will have a meaningful impact on the company’s financials – and, in turn, share prices.
Bottom line: In this increasingly valuation-crazed market, don’t let Apple pass you by. It’s legitimately underpriced and primed for the picking.
Ahead of the tape,