The concept of the technology world is produced and developed by three superior companies: Apple (AAPL), Sony (SNE) and Microsoft (MSFT). These three companies are shaping our everyday electronic devices and software with adorable success. I expect these companies to perform well in 2012. However, as investors, we need to find the most profitable and invest accordingly. Therefore, I have analyzed their products that will come ? or will likely come in 2012. These products are very likely to have booster effects on the stock prices. I have also taken the fundamentals of producers into account. Here are my opinions on the profit catalysts for 2012.
(Data obtained from Finviz/Morningstar, and current as of January 6. You can download the O-Metrix calculator here.)
iPhone 5
The new iPhone was expected in 2011, but 4S has created a sizeable disappointment among Apple fans. The updated iPhone 5 is expected to have a faster processor (A5), iCloud service, a better camera and a larger screen. Longer battery life, 4G/LTE support and thinner body design are among common expectations, as well. The company is in a deathmatch with Samsung and HTC, so Apple will have to do its best. I believe the company will try releasing the new iPhone in July, as it always has, but last year might have changed the timing, so some day in late September is OK. If Apple produces an iPhone within these expectations, it will easily reclaim the throne.
iPad 3
Apple made another big leap with starting the tablet computer age, and it wants to cement its place in this market. Apple is expected to release two new iPad models in the beginning of this year, which will let the company address a larger percentage of society. The new iPad is expected to have Apple?s patented Retina Display, a 2048x1536 resolution, an extended battery life, and a quad-core A6 processor. As far as I can tell, there?s hardly any tablet computer to rival iPad 3 here. Amazon?s (AMZN) Kindle is quite poor for a comparison with iPad 3. This product is expected to be released in February.
As a stock, Apple is among my favorites. It is selling 15 times earnings, and nearly 11 times forward earnings. Profit margin is 24.0%, and ROE is 41.7%. Since March 2007, earnings per share (ttm) have increased by 775%. Apple will stay in power as long as it produces and develops the products from the Steve Jobs era. I expect Apple to realize some radical innovations, as I have mentioned here.
Apple is doing great these days, testing its new highs. The last time Apple reached such a price was October 18, when it was trading $422.24 a share, and fell to $398.60 a day after. According to these numbers, Apple has a higher-than average O-Metrix score of 8.35.
Sony Personal 3D Viewer
Probably the most intriguing electronic device out there in the tech world of current times, it lets you view your own 3-D movie theater at home with a 750-inch display. While this product may reshape the concept of home entertainment systems, using it more than three hours a day is not recommended for your eye health. Moreover, this will never claim the throne of television or cinema, as it is suitable for single use only. I don?t believe it will offer something better than coming together and watching football with your family at Thanksgiving, cuddling up at the cinema eating popcorn, or laughing together at the most funny part of the film. I believe that this product kills all emotion and happiness mentioned above. Why would people want to watch movies without even seeing the people in the same room? I don?t believe this product will be a PlayStation, but Sony needs to develop it much more if the company wants to make some profits.
PlayStation 4
It is highly possible for us to meet the new PlayStation in 2012, as Sony has a tradition of releasing a new version of PlayStation in every six years. PlayStation 4 is expected to have a faster processor, a changeable graphics card, compatibility with PS3 games, hypersensitive sensors for motion gaming, dual-stock controllers, and 3D gaming. Sony suffered from unauthorized login attempts on its PlayStation Network in October. Sony has strong rivals like Xbox and Wii, so an updated PlayStation is a must this year.
While this new PlayStation will rock for sure, Sony is not as strong as Apple to benefit from that. It shows a forward P/E ratio of 18.7, and analysts estimate a 2.0% annual EPS growth for the next five years. Sony lost more than half of its value since January 2011. Both assets and revenue are dropping for some time. Earnings per share and revenue are doing terrible for a long time. Personal 3D Viewer doesn?t seem to be a proper way of spending money and effort for Research & Development. PlayStation 4 is the key for Sony?s survival in such an environment, but the stock is in poor condition.
Windows 8
Along with computers, Microsoft is offering an enjoyable touchscreen experience for smartphones and tablet computers with its Windows 8. A customizable internet provider, less processor and hard drive usage, and quick installation are some of its new features. Windows has no strong rivals in this market, with the weakness of Linux and the Mac OS's limitation of use.
As a stock, Microsoft is another favorite of mine. With a P/E ratio of 10.2, and a single-digit forward P/E ratio of 9.2, Microsoft will have a 40% discount to its 5-year average. Five-year annualized EPS growth forecast is 11.1%, and PEG value is 0.9. Microsoft sports an acceptable dividend of 2.85%, while the profit margin is 33.0%, higher than the industry average of 28.3%. Debt-to equity ratio (0.2) is another strong number, crushed by the industry average of 10.0.
Although Microsoft has met EPS estimates last quarter, it beat EPS estimates in the three quarters before that. Dividend history is adorable. Revenue, cash flow, and assets are amazing. Microsoft is a screaming buy as soon as it falls to reasonable prices. Microsoft doesn?t have much competition in the operating system arena, and Windows is the most widely used system all over the world. This surely increases Microsoft?s profitability. Microsoft has a B Grade O-Metrix score of 7.19.
Summary
Microsoft has a wider range of products with its smartphones, Xbox and software, but it lacks the breathtaking innovation that Apple offers. Apple has reshaped the phone and computer market for sure, and its Research & Development team is doing great. Steve Jobs has opened a new era in the technology world. Sony, on the other hand, will profit only from PlayStation 4, in my opinion. Don?t expect such a big success from the Personal 3D Viewer. Besides, Sony is relatively poor as a stock.
In every branch, Apple seems to be breaking the tape in 2012. Microsoft is OK as well, but I don?t recommend Sony. Apple and Microsoft will benefit the most from their products this year. You can add them to your portfolio on a pullback.
Disclosure: I am long AAPL.
Source: http://seekingalpha.com/article/318414-profit-catalysts-for-apple-sony-microsoft?source=feed
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