5 Things That Can Propel Apple Back Above $500

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Even after a recent rebound off their lows, Apple's (NASDAQ: AAPL  ) shares still trade for about 35% below their all-time high of $705. Could they once again soar to such lofty levels? It's certainly possible, but before that happens, Apple's shares must first cross back above the $500 level. Here are five events that could help that happen in the days and months ahead.

A deal with China Mobile
In the third quarter, Apple's revenues in its Greater China business fell more than 40% compared with the previous quarter and were down 14% year over year. Weaker economic growth in China and other macroeconomic factors were partly to blame, but Apple must take steps to restore growth in this vital market nonetheless. Apple plans to double the number of retail stores in China over the next two years in an attempt to boost its distribution and to create more brand awareness. But there's another action Apple can take that would probably have an even more significant impact: reaching a deal with China Mobile (NYSE: CHL  ) to bring the iPhone to its massive network of more than 700 million mobile subscribers. You read that number correctly -- that's more than twice the number of people that live in the United States. And while a great many of China Mobile's customers would be unable to afford the current versions of the iPhone, those who can afford the device can move the needle significantly in terms of Apple's sales in the region and on an overall revenue basis.

A mid-priced iPhone
Another thing that will help Apple's emerging-market sales is a new, less-expensive version of the iPhone. In many areas of the world, incomes are far lower than in the U.S., and cheaper smartphones powered by Google's (NASDAQ: GOOGL  ) Android operating system -- along with even cheaper feature phones that are "smart enough" -- are gobbling up market share at the expense of higher-end smartphones. Apple has been getting more aggressive and has met with some success offering older versions of the iPhone -- currently the iPhone 4 -- at a substantial discount to the iPhone 5. This discounting strategy has also served Apple well here in the U.S. by appealing to more price-sensitive consumers and bringing them into Apple's typically sticky ecosystem. But a new mid-priced iPhone would probably drive even higher sales in international markets, because consumers tend to like new devices better than discounted older versions, and Apple can better target the needs of these developing-market consumers with a product specifically designed for them.

A dividend boost
Much has been made about Apple's massive share-buyback program, and for good reason. Apple has already spent billions buying back huge chunks of its shares, which reduced Apple's shares outstanding by more than 30 million shares in the third quarter alone. This, in turn, will boost Apple's earnings per share and probably its share price, as many investors tend to focus on metrics such price-to-earnings multiples. But Apple's massive cash hoard still checks in at more than $140 billion, and with free cash flow of more than $40 billion over the past 12 months, Apple can easily afford to boost its dividend by 20% or more. Such a move would probably entice income-seeking investors and create excitement around Apple's stock once again.

A successful iOS 7 release
Many critics have argued that Apple's iOS operating system design has become stale and boring, and -- even worse -- has been surpassed by Google's Android OS in several important aspects. iOS 7 can change all of that. Lead designer Jony Ive has completely revamped the appearance of Apple's mobile operating system with a fresh, more modern look and impressive new features that are making the upcoming release of iOS 7 one of the most anticipated in recent memory. Should iOS 7 delight users, it could go a long way toward showing that innovation is alive and well at Apple.

The Apple TV we've been waiting for
Some may scoff at my assertion that a redesigned operating system is enough to appease those who believe Apple's innovation magic died when Steve Jobs passed away. In fact, I agree; Apple needs to do more. And probably the best way to prove to critics and investors alike that Apple is still capable of creating game-changing new products is ... to create a game-changing new product. And the most game-changing of them all would be the long-rumored and almost mythical Apple TV. I'm not referring to the Apple TV currently on the market. I'm speaking about the one we've been waiting for that's supposed to completely disrupt the cable television industry. Rumors have been swirling that Apple is attempting to reach deals with content providers that will allow it to offer a premium TV experience that would free viewers from ads and commercials. While the details are still unknown, such a creation would probably meet with strong demand and drive excitement for Apple's ecosystem of products and services, thereby strengthening the Apple halo effect and restoring the shine on Apple's brand.

The Foolish bottom line
Out of the five items I've listed in this article that could drive Apple's share price back above $500, the new Apple TV may be the one for which we wait the longest. But it can't come soon enough; Google's new Chromecast Internet TV device has been meeting with rave reviews, and Apple cannot allow Google to capture a beachhead in the all-important battle for the living room. But that's just one area of a multi-front war currently being waged by the tech titans. For Apple's stock to soar, Apple will have to win in several key areas. And along the way, there will multiple major developments that could crush Apple. In The Motley Fool's special free report titled "5 Secrets to Apple's Future," we outline the key factors every Apple investor needs to watch. Just click here now for your free report.

Read/Post Comments (20) | Recommend This Article (39)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

  • Report this Comment On August 11, 2013, at 9:52 PM, webguy76 wrote:

    Does anyone remember what happened when Jobs was fired from Apple? The company slipped to near extinction while Jobs was out developing a computer company called NeXT. It was only until Jobs came back that Apple did anything, and only until iTunes and the iPod, not the computer, that Apple had any real relevance. Lets face it: some companies just need a strong leader and unless that person is there the company fails. Apple is a shadow of itself and will never be what it once was.

  • Report this Comment On August 11, 2013, at 11:37 PM, MrSmith210 wrote:

    Yeah you're right. All their existing customers are fleeing iOS and their products in droves. New, younger generations entering the market hate them. And all their cash is dried up. Apple is going out of business for sure. It won't be a bigger company in 10 years. It's collapsing because one person died. Even Steve jobs would admit that's an insane thought that he, and only he, can make apple money and allow it to create great products. All these other employees were directed by steve jobs. All of them. He dies, the wealthiest and smartest company on the planet is dead meat. Lol. I mean really.

  • Report this Comment On August 12, 2013, at 12:47 AM, techy46 wrote:

    All 5 things to get Apple back over $500. And what happens if Apple's next quarter isn't any better then the last or worse?

  • Report this Comment On August 12, 2013, at 6:04 PM, GaryDMN wrote:

    Webguy and MrSmith - Seriously? Steve Jobs was sick and dying for a decade before he died. Tim Cook has been in control for the the entire time the iPhone and iPad have been on the market. Jobs had a liver transplant in early 2009 and I know personally what happens before, during and after a liver transplant. He was very, very sick before, during and after. He died from Pancreatic cancer, which led to the transplant, but didn't deter the cancer or the death sentence that accompanies Pancreatic cancer. The liver transplant only extended his life, because they can't transplant a pancreas. Apple and Jobs learned from their past and they were and are so much more than JUST Steve Jobs.

  • Report this Comment On August 12, 2013, at 6:16 PM, beaker2010 wrote:

    GaryDMN....Seriously? Don't they have sarcasm where you come from? Mr Smith was kidding, this is bad when someone needs to explain the comments to you.

  • Report this Comment On August 12, 2013, at 6:18 PM, CoreAndExplore wrote:

    "Apple has already spent billions buying back huge chunks of its shares, which reduced Apple's shares outstanding by more than 30 million shares in the third quarter alone. This, in turn, will boost Apple's earnings per share and probably its share price, as many investors tend to focus on metrics such price-to-earnings multiples."

    Many investors focus on metrics like P/E ratios because they tell you about your exposure to company earnings. Having fewer shares outstanding means that each investor's share of the company is greater, and with the cash available for massive buybacks even beyond what's currently authorized, that's probably the most significant reason Apple's stock will have a strong tailwind behind it from this point.

    Yes, overall earnings growth is obviously very important, but far too many people shrug off the significance of per-share earnings growth. BOTH are very important to keep an eye on. Additionally, the way Apple decided to fund $17 billion of that program was pretty brilliant.

  • Report this Comment On August 12, 2013, at 6:43 PM, tfmeehan wrote:

    Yeah, cheap phones are sold by the barrel and they don't make their companies much, if any money. Marketshare? Really? When those companies that are gobbling up marketshare start to also lead in profitshare, then we'll talk.

    Innovation...whose definition? The standard that Apple is held to is different than other companies. Maybe it's Apple's fault for raising the bar so high but we laud Samsung as the new innovator because they stick in a bigger screen and bloat the specs. Apple has to redefine a market or they are no longer innovative.

    Name one other company that has redefined a single market during the time that Apple has redefined 3?

    And let's talk about time. Apple is just now reaching the time that passed between the last 2 major innovations, it was 7 years between the first two, so maybe it will take another year or two (maybe more) but they are still by far the best bet to redefine a new market before someone else.

    Its like Tiger Woods at his peak, its Apple against the "field". In my opinion, Apple is still the prohibitive favorite.

  • Report this Comment On August 12, 2013, at 6:49 PM, SkepikI wrote:

    ^ many investors focus on metrics like P/E ratios because they actually correlate with investing success..... in fact, pitiful thought its correlation might be, P/E is the only metric that shows anything other than totally random association with that kind of success. Just read Nate Silver.

    Granted, I use other metrics to try to understand the company, LIKE div yield and payout ratio, but the actual analysis of data with correlation factors suggests I am just fooling (ha) myself

    I am not at all sure when APPL gets to $500, but neither am I Foolish (ha) enough to predict it will take these five factors or any others to do it. I'd rather not eat crow when it happens unexpectedly as BDM jumps in.....

  • Report this Comment On August 12, 2013, at 9:04 PM, thuringensis wrote:

    We are thinking too small. I want an Apple car. You know, beautiful, hydrogen powered, and drives itself--where it knows you want to go.

  • Report this Comment On August 13, 2013, at 1:08 AM, CoreAndExplore wrote:

    @Skepikl: I think plugging in individual ratios in a vacuum and interpreting the resultant correlations is useful only on a theoretical level, and is nice statistical fodder for guys like Nate Silver. The correlations DO rise significantly, however, as you add more and more stringent requirements to the list, all in support of each other. P/E ratios are only one tool in an immense tool-kit of fundamentals, but they are meaningful, just not in isolation, as is the case with just about anything in finance.

  • Report this Comment On August 13, 2013, at 5:36 AM, wax wrote:

    Apple, Apple, Apple. Warren Buffett, Warren Buffett, Warren Buffett.

    You have just read 70% of all of the TMF articles. The other 30% are about "why" something happened.

    As if anyone cares after the fact. What good does it do then?


  • Report this Comment On August 13, 2013, at 8:22 AM, mikecart1 wrote:

    Ok $500 is fine and all but what is with these lowered expectations guys?! What we should be asking is what can propel Apple back above $700!

    Mediocrity isn't an option!

    And for those shouting iTV, how much you think something like that would really cost? And why would anyone pay that $$$ for something that is 95% like any other TV minus the awesome design, better screen, and iStore apps? What we need to talk about is the next sector Apple can dominate.

    People seem to forget that Apple was never a personal music player company.

    It was never a cell phone company.

    It was never a tablet company.

    What's next?! And don't say iTV! iWatch is a stretch because the only reason why iPhones are affordable is that the high costs are concealed under the 2 biggest devils in the communications business: VZ and T!!!

  • Report this Comment On August 13, 2013, at 9:43 AM, KGOldWolf wrote:

    Apple comes out with a reduced function iPhone for emerging markets. Cuts a deal with China Mobile and its Indian counterpart. People flock to the Apple brand. Huge volume, reduced margin but volume still drives improved profit level. New users want more features as the emerging market telecom infrastructure upgrades. Built-in upgrade market.... meanwhile Apple comes out with new devices to open other markets.... iWatch isn't going to be that big, Apple TV should have legs. As the public sees the new "electronic wallet" features and security built into the new iPhone releases, there's a new wave of in-field iPhone upgrades. Maybe I'm wrong but I'm betting money on this.

  • Report this Comment On August 13, 2013, at 9:47 AM, Monclover wrote:

    Simply introducing new iPhones is not going to cut it. Apple either comes-up with a new and innovative

    product(s), or it will simply join the ranks of the other Computer/Cell Phone providers all scrambling for market share which is like playing Musical Chairs.

  • Report this Comment On August 13, 2013, at 9:48 AM, dbrightwell wrote:

    Rave reviews on Chromecast? I'd say they are mixed at best. The device is inexpensive and has limited capabilities. People will buy it because its cheap but how long they will continuevtonuse it remains to be seen.

  • Report this Comment On August 13, 2013, at 6:42 PM, Tsharp1947 wrote:

    #6 Carl Ican buying a $ billion in shares and bragging about it!

  • Report this Comment On August 14, 2013, at 3:31 PM, SkepikI wrote:

    So here we are just TWO days later and APPL is over $500/sh.... crow anyone?

    @coreandexplore- No doubt there is merit in your there proof in terms of correlation (multi-variable if need be) to go with it? Not being snide, I really am interested because of all the multivariable "studies" I have seen fail to measure up when tested rigorously.

    No doubt, part of the problem is the QUALITY of some of those ratios and then there is the volatility of certain measures used, like price.

    I certainly look at the "quality" of ratios and companies very closely before I invest. Does the P/E look shaky? Is it warped by the last quarter, year etc? Gross stats that look at say all P/E or all Div yields, etc fail to take that elementary step...BUT then you could argue its no longer statistical, just judgmental.

  • Report this Comment On August 14, 2013, at 8:48 PM, Marmadukemark wrote:

    Ichan buying? All he had to do was tweet about it.

  • Report this Comment On August 17, 2013, at 5:48 PM, dsciola wrote:

    In my opnion, AAPL's true driver of value is its brand...and one of the best ways to measure its brand value is its gross margin...

    Joe T,

    If they intro a new cheaper iPhone what does this do to AAPL margins, its brand, and ultiamtely AAPL's value here?

    Recall how much the stock tanked following its gross margin droppiong nearly 10%...sell-off was intense...



  • Report this Comment On October 12, 2013, at 3:13 PM, thidmark wrote:

    "So here we are just TWO days later and APPL is over $500/sh.... crow anyone?"

    And two months later, it's not.

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