Catalysts That Make Apple (AAPL) A Buy

Sansa Vs. iPod: KO in T-10 seconds, AAPL’s favor

• Recently YHOO and SNDK announced the launch of a wifi enabled MP3 player. Sansa Connect, $250, connects wirelessly to YHOO’s music services, which one can avail for $12 a month.
  
  In my opinion, Sansa is one of the worst creations. Not only is it ugly, I’m not going to be paying 2 extra bucks when I can get this and more at Napster (assuming most buyers will be in US of the Sansa, as Napster’s service is US-only). In the era of pirated music, each extra cent counts, therefore Sansa (what a ridiculously uncool name) is definitely not on my buy list.
  
  
• Let’s recap: 1) Its ugly, uncool and 2) cheaper music available elsewhere. Feel free to add your own flaws! Some of the main reasons millions of people own AAPL is: 1) super cool, 2) patented wheel technology which makes it very easy and comfortable to use.

Sansa or SaanSa, maybe Saaaaaansa? (reminiscent of Seinfeld episode “Salsa. Can I have some salsa; give me some saaaalsa, salllllsa.)

New Products & Future Expectations

1) Flash & HDD Video Pods

• According to rumors, Apple is planning two distinct models, one flash (16GB going for $249-299) and one HDD type (60GB at $299-349 with additional features such as: GPS, Wifi & probably longer battery life), both capable of video. Expect ‘em to come out in 2^nd half.
  
  
• In my opinion, AAPL is doing all the right things in this division. They are catering to each consumer who is price & feature conscious (digital media to HD quality viewing experience to Wifi & ease of use), a big key and something lacking in the world of disappearing Zunes & up-coming Sansa-like hubris.
  
  
• Consumers should also expect updated Macs (optimized for gaming & HD quality) & Nanos (small alterations to the in/exterior and potentially new functionality).

Other new products already known to the market 2) iPhone and 3) Apple TV.

• So far, AAPL has averaged 18.5 million units/year since 01. The Halo effect has worked, and is working, in Mac’s case and investors should expect AAPL to be very successful (thanks largely to the design, ease of use and marketing efforts) that will translate into strong sales of the much anticipated iPhone. Roughly estimating, AAPL expects sales of a million this year and about 7-8 million iPhones by 08.
  
  
• The sales volume of these new product launches coupled AAPL’s ability to generate higher revenue/product vs. competitors, will help AAPL’s gross margins will widen to 33-35+% in 07 vs. 29 in 06. The Street is expecting revenue growth of 26% for 07.
  

Best Buy & Apple Team Up

• In April, the duo announced plans of an Apple store within a Best Buy one (a drastic change from the current setup). Investors shouldn’t expect much of a boost to revenue as they will be testing waters with just 200 stores for now, but if it works out like Chanel at Nordstrom, it would be terrific.
  
  
• Why? BBY has about 800+ stores which can provide significant eyeballs hence translating into higher sales for AAPL. BBY can be a hub for great things to come distribution wise (both agreed to sell Apple TV 1 week in advance of launch), so keep an eye out for this.

Piper Jaffray Survey

• Piper Jaffray recently completed its 13th bi-annual teen survey, a national study of approximately 500 teenagers buying patterns and brand preferences. As a part of the survey, PJ asked about portable media players, the iPhone, and online music.

Results of the Spring 07 study vs. Fall 06 results

• a) iPod Market share grew to 82% from 79%. (b) 84% of students surveyed had heard of Apple's iPhone. (c) When asked if they would pay $500 for an iPhone, 25% said yes. (d) Of those students who legally purchase music online, 89% said they use iTunes (down slightly from 91%).
  
  

• They concluded, “Apple's dominance in the portable media and online music markets are going largely unchecked. Also, iPhone awareness among students is high, and 25% show interest at the $500 price-point. We believe that the teen demographic is a critical component of long-term growth in both markets, and Apple is clearly leading the category.”
  
  
• Stock Pickr: Some of the top funds own AAPL- From Tudor to Pequot to Lone Pine Capital, click here for the rest.
  

In conclusion, AAPL’s strength across the board (up to $12 billion in cash, robust revenue and sales growth) and upcoming catalysts leave me still bullish (recommended it last on Dec. 20^th, up 10 since then) on the stock.