3 Bold Predictions for Apple in 2014

It was a big year for Apple (NASDAQ: AAPL  ) in 2013 -- albeit a fairly predictable one. Importantly, Apple has minimized some worries by proving it can still boost sales on a year-over-year basis and by stabilizing its declining margins. But, unfortunately for investors, the market still isn't giving Apple stock much respect. Has the Street lost faith in Apple's ability to consistently deliver blockbuster products? After all, the rumor mill's iWatch was never unveiled, and the iTV never made its debut.

The market doesn't have big expectations for Apple. Its conservative valuation is evidence. Though it's tough to put a finger on the exact cause for the skepticism about Apple, it is probably fair to say the overall market still isn't sure if Apple can continue to innovate over the long haul without Steve Jobs. And 2013's fairly predictable year probably didn't help.

In 2013, Apple didn't have many surprises for the Street. Not only did Apple not enter any new product categories, but the form factor on most of Apple's products remained mostly unchanged, with two exceptions:

But Apple is going to need to accomplish more than this to earn a price-to-earnings multiple that is more closely aligned with the S&P 500's hefty multiple of 19.

Here are three bold predictions for Cook & Co. that could improve the sentiment toward Apple stock in 2014.

1. Apple will enter a new product category.
In Apple's fourth-quarter earnings call, Apple CEO Tim Cook told investors that Apple plans on introducing new product categories in 2014.

Though there have been rumors that Apple could launch a physical television toward the end of 2014, the alleged Apple smartwatch seems more likely.

2. Apple will launch a larger iPad.
Though it may not have made sense for Apple to introduce a larger iPad several years ago, the growing number of annual tablet sales suggests more consumers are opting to buy tablets as a substitute for laptops. Though a larger tablet may not be for everyone, the market for an "iPad Pro" is likely larger than it used to be -- maybe large enough for Apple to finally consider it seriously. And Apple's rapid move to 64-bit architecture in its A7 processor could have been its first step toward launching the device.

3. Apple's EPS will grow by double digits, thanks to China Mobile.
Though Apple's earnings per share in fiscal 2013 actually declined by 10% from 2012, this trend doesn't look like it will continue. Not only does Apple's gross profit margin story appear to be finally looking up, but Apple's deal with China Mobile alone should add substantial incremental value to Apple's 2014 earnings.

Next stop, $700?
Though a successful launch of an iWatch or a larger iPad may help validate Apple's innovative capability in the post-Steve Jobs era, the China Mobile deal likely has the most potential to really improve Apple's EPS in the short term. Together, however, three outcomes have the potential to get the Street a bit more excited about Apple again. Is a $700 stock price a possibility again?

Of course, none of these bets are certain -- they're just bets. On that note, I'd love to hear your thoughts: What do you think about these predictions? What are your predictions for Apple in 2014?

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Read/Post Comments (7) | Recommend This Article (6)

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  • Report this Comment On December 31, 2013, at 1:22 PM, jdmeck wrote:

    Will Apple truly innovate in 2014? Probably not. Will anyone else? Absolutely not.

  • Report this Comment On December 31, 2013, at 2:11 PM, djtetsu wrote:

    Tim Cook might need to take some acid. I am big on Apple, but it's really interesting on how this will play out.

    Iwatches has to provide something of value that will be worth another damn device we need to keep charging. FB alerts, emails, microphone, an audio outlet, everything I can think of I'd much just rather use my phone.

    Unless the entire phone is on your wrist.. with a curved screen.. Hmmm.

  • Report this Comment On December 31, 2013, at 2:18 PM, Awebb30 wrote:

    I'm hoping that an iWatch doesn't happen. Unless it does something fantastically cool (iTeleport?), I just couldn't consider buying one. The Galaxy Gear commercial showing the customer looking at the phone with an incoming call, and then electing to answer on the watch instead is laughable. There is no reason to own a smartwatch that simply mimics the functions of a phone. I'll hold out hope that Apple has something cool up their sleeve for a watch, but I'd say it's a long shot.

  • Report this Comment On December 31, 2013, at 2:39 PM, fauxscot wrote:

    Here are three more bold predictions and you can quote me:

    1) Apple will still be in business.

    2) Apple will still own the high end, high margin segment of every single piece of business it engages in.

    3) Apple will continue to return shareholder value in the form of buy backs, dividends, even more buybacks (probably) and likely will have some share appreciation.

    Add to that:

    Apple will buy small, promising companies that add value to its enterprise.

    Apple will open more worldwide retail outlets.

    Apple will exploit implied opportunities (e.g., it's millions of credit card customers, ad platform, streaming audience, and things like iBeacon.)

    A negative prediction?

    P/E multiples will still be inexplicably low compared to the no-profit/profit-someday-maybe crowd (i.e., Amazon)

    Yeah, next stop 700, but not for any particularly good reason. Should be 1k, now.

    Good article. Thanks for the hard work. Happy 2014!

  • Report this Comment On December 31, 2013, at 6:28 PM, gametv wrote:

    my prediction for 2014 is that apple introduces an iwallet feature and has 80% of its user base using it for transaction within a year. retailers all want the high-end demo of apple, so they all buy ibeacons and the shopping experience is changed forever. apple finally earns some respect and p/e multiples start to look more reasonable. and apple kicks google off as the search engine on iphones and installs its own search tech late in 2014 or in 2015. plus, apple finally removes samsung from its product supply chain.

  • Report this Comment On January 01, 2014, at 9:53 PM, johnestromjr wrote:

    Dan, those aren't very "bold" predictions. Still I like them :) My "bold" predictions for 2014 - all of Apple's iPhones will have a 64 bit chip. And their will be at least three iPhones - possibly four. At least one will have a large screen - over 5", one will be an upgrade from the existing 5S iPhone and the 5C will upgrade to a faster chip as well.

    Apple's board will increase the dividend by at least 15% but possibly as high as 25% if Q1 results are stellar. They may also modify the buyback of shares above current level but not as high as Carl Icahn would like.

    Finger scan technology will be standard in all iPads and iPhones. Face recognition software will be on all Macs and iPads as well.

    As a fourth prediction - Apple will begin to put into operation the ability to pay at checkout by iPhones and iPads.

  • Report this Comment On January 20, 2014, at 9:33 PM, Digitalsuz wrote:

    I would like to see Apple get involved in the induction technology market. I would certainly purchase an induction range knowing apple had a share in creating it.

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