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Special Alert: Apple added to the Tematica Investing Select List

Special Alert: Apple added to the Tematica Investing Select List

 

KEY POINTS FROM THIS ALERT:

  • We are adding shares of Connected Society company Apple (AAPL) to the Tematica Investing Select List with a $200 price target.
  • In our view, Apple and its new iPhone models are a 2018 story, and we see the recent string of upwardly revised expectations continuing as Apple tweaks its iPhone production and takes newer models global.
  • We would look to use pullbacks in the AAPL shares to improve our long-term cost basis.

This morning we are adding, some would say finally, Apple (AAPL) to the Tematica Select List. It’s no secret that those of us at Tematica are hardcore users of the company’s products — from MacBooks, iPhones and iPads, to the Apple Watch, Time Machine and various other devices. Despite its deep bench of product, Apple, at least for now, is a smartphone company. Even ahead of the recent launches of its iPhone 8, 8S and iPhone X products, Apple derived the bulk of its revenue and profits from the iPhone.

Apple does have other businesses like Apple TV that bolster its position in our Connected Society investing theme, and the company appears to be branching out into live content similar to Tematica Investing Select List companies Amazon (AMZN) and Facebook (FB). We suspect that like many past products and services, Apple will look to unveil its content offering when it is ready, not when the financial media thinks it will. We see that as an added tailwind on the horizon for AAPL shares, provided it can get the content right. Case in point, we were not won over by Apple’s Carpool Karaoke series; however, per the financial press, Apple appears to have recognized its shortcoming and has gone on a hiring spree to course-correct this effort.

 

For many subscribers, the probable question is “Why now?”

Candidly, we have always kept eyes on Apple’s business given how it touches our Connected Society investing theme as well as its shares. Were we underwhelmed by the company’s September event? Yes, we were, given the staggered nature of the new iPhone launches and the simple fact the company kicked off the event discussing how it was going to revolutionize its Apple Stores vs. talking products. There was also the concern that iPhone sales would pause as shoppers waited for the iPhone X to hit shelves not to mention rumored component shortages.

Over the last few days, orders for the iPhone X commenced and early indications suggest it will be a brisk seller. Almost all Apple store channels are now reporting 5-6 week delivery times for new iPhone orders across all configurations of size and color, which means new online orders will not be fulfilled until early December. The initially low production volumes were due to component constraints for the new 3-D face-scanning sensor and a circuit board for a new camera were to blame and Apple is expected to have this corrected in the coming weeks.

Turning to the iPhone 8, while sales have been tepid ahead of the iPhone X launch in the U.S., this morning a new report from Canalys shows the iPhone 8 has led Apple to break a run of sales decreases that stretches back six quarters. Per the report, Apple should see a 40% annual growth to 11 million iPhone units China during the quarter. As with any new product launch, we see Apple tweaking production between these new iPhone models to better match demand.

In our view, we are likely to see Apple up its iPhone X product and dial back production for the iPhone 8, which is a nice but modest upgrade from the iPhone 7 — a model that continues to sell well. That’s right, it’s not just about the new models – the older ones, which are less expensive, help drive Apple sales in the all-important emerging markets like India, where smartphone penetration is far lower than in the U.S. In the U.S., smartphone penetration passed 80% last year. By comparison, roughly one-third of mobile phone users have a smartphone in India, and that figure is expected to only move higher in the next few years.

As we look back on prior iPhone launches, we find ourselves saying “I’ve seen this movie before” and we have. It usually bodes rather well for Apple and we expect that to be the case once again given the large install base Apple has for the iPhone. Last summer Apple sold its 1 billionth iPhone, but as we know from experience and upgrades, not all phones sold are still in use. According to research from UBS, the number of active devices is around 800 million, roughly 80% larger than when Apple debuted the iPhone 6. Simply put, the larger the number of active users, the larger the number of people upgrading every time Apple unveils a new smartphone, especially as newer versions of iOS tend to make older iPhone painfully slow.

There is also the added benefit of Apple putting would-be iPhone buyers in a box as they look to match either an iPhone upgrade or a new purchase with storage needs. Given the increasing usage of the camera for pictures and video, Apple has upped available storage, but that comes at a cost. We see this as well as the iPhone X helping move Apple’s average iPhone selling prices higher in the coming months.

Apple will report its 3Q 2017 results later this week, and odds are given the timing of the new iPhone model launches the company will get a pass of sorts on that performance. In our view, the guidance will be what investors will be focused on, and they will be listening, as will we, not only on iPhone production commentary, but the timing around these models being launched in other markets. As these models go truly global, it makes the iPhone story and thus Apple’s story a 2018 event. We are not alone in that thinking given that current revenue expectations for 2018 have Apple delivering 17% growth to $266.8 billion vs. 5.5% growth this year. As this occurs, odds are the Wall Street bulls will once again return to AAPL shares, and we want to be there ahead of them.

We recognize Apple can have great quarterly earnings report that leads to AAPL shares popping, but from time to time the company has issued results that caused some degree of investor indigestion. We want to be positioned for the former, but we will use the latter should it happen later this week to improve the cost basis for AAPL shares on the Tematica Investing Select List for the longer-term. In our view, Apple is one of the companies that will expand its offering as our Connected Society continues to expand past smartphones and computers to the home, car and the Internet of Things. Apple is paving the way for proprietary content, adding to its position in the home with its HomePod digital assistant and growing its partnerships in Corporate America.

 

Apple’s story is far from over.

Our price target on Apple shares is $200 or 18x expected current 2018 consensus EPS of $11.16. We’d note that over the last few weeks that 2011 consensus EPS figure has crept up from $10.67, and there is the rather likely possibility we will see that figure move even higher as we enter 2018. Over the last several quarters, Apple has regained its past track record for beating bottom line expectations and given the high profile nature of the iPhone X we would not be shocked to learn Apple has once again sandbagged expectations for the second half of 2017.

Over the last five years, Apple shares have peaked at an average P/E multiple of 16x and bottomed out at 11x. That suggests an upside vs downside tradeoff in the shares between $120-$180, vs. the current share price near $160. As we noted above, we strongly suspect Apple will surprise to the upside in 2018 and could deliver EPS between $12-$13; the current high estimate for Apple EPS in 2018 sits at $13.29. In the coming quarters, provided Apple’s EPS beating track record continues, we see 2018 EPS expectations moving higher, and Wall Street bumping up price targets along the way. If Apple stumbles near-term, we would look to aggressively scoop up the shares between $140-$145.

  • We are adding shares of Connected Society company Apple (AAPL) to the Tematica Investing Select List with a $200 price target.
SPECIAL ALERT – Adding Nokia shares to the Tematica Select List

SPECIAL ALERT – Adding Nokia shares to the Tematica Select List

 

  • We are issuing a Buy on  Nokia Corp. (NOK) shares with an $8.50 price target.

  • At this time, there is no recommended stop-loss level and we would look to scale into the shares aggressively near $5.50.

 

Yes, you are reading that correctly. After recently adding Nokia Corp. (NOK) shares to the Contender List, we are now adding them to the Tematica Select List given continued progress in its higher margin, intellectual property (IP) business, Nokia Technologies. We’ve seen the power of this Asset-Lite Business Model investment theme before with Qualcomm (QCOM) and InterDigital (IDCC) and it has the power to not only transform Nokia, but deliver EPS  upside relative to expectations.

To jog people’s memory, in the most recent quarter the Nokia Technologies division accounted for 7% of Nokia’s overall revenue, but delivered 37% of operating profit. To be clear, we like the operating leverage in this business. In the coming quarters, we also expect Nokia to benefit from continued wireless infrastructure buildout from both existing 3G and 4G networks as well as eventual deployments on 5G networks.

 

So why add NOK shares to the Select List now?

Early this morning it was announced Nokia won an arbitration battle against LG Electronics, which follows recent deals with Samsung, Apple (AAPL) and Xiaomi Electronics, a Chinese smartphone company. From LG Nokia will receive both a one-time payment, which was not disclosed, as well as recurring revenue that is expected to be in the realm of $275-$300 million. This is a meaningful bump to Nokia’s IP, which had sales of 616 million euros in the first half of 2017, and gives far more comfort in the likelihood of the company hitting 2018 EPS expectations of $0.37, up from this year’s consensus EPS of $0.30. Also too, as Nokia continues to stack up licensees, it becomes increasingly easier to win over its remaining IP targets.

Our price target on Nokia shares is $8.50, which equates to 23x expected 2018 EPS or 1.0 on a price to earnings growth ratio (PEG) basis using the company EPS growth over the 2016-2018 time frame. Given the degree of upside to be had, we are adding NOK shares to the Select List with Buy. At this time, there is no recommended stop-loss level and we would look to scale into the shares aggressively near $5.50.

Over the coming quarters, we expect to see more movement in the company’s wireless infrastructure business as 5G moves from testing and beta to deployment. With Nokia Technologies, the company has booked some impressive wins, and it can turn its attention to Huawei, which according to data compiled by IDC is now the third largest smartphone vendor behind Samsung and Apple. Also, as Apple brings augmented reality into the mainstream with its new iPhone models and does the same with health applications with Apple Watch, this opens the door for other technology licensing opportunities at Nokia given its portfolio of connected health, augment and virtual reality as well as other technologies. What this will require is patience with the shares, but given we are not only thematic investors but ones that have a longer than the herd time horizon that’s just fine with us.

 

 

Here’s what we’ll be watching for at today’s Apple special event

Here’s what we’ll be watching for at today’s Apple special event

Several of the Disruptive Technologies investment theme companies currently on the Tematica Select List will play a key role in the Apple Special Event scheduled for Tuesday, September 12th. In all likelihood the companies themselves will never be mentioned during the event, but with expectations once again running high ahead the next generation iPhone, here’s what we’ll be watching for as it pertains to the Tematica Select List.

 

Early this afternoon, Connected Society and smartphone reliant Apple (AAPL) will hold its next special event that is widely expected to unveil a bevy of new products, including its latest iPhone models. Much has been made over the last few days of “leaked information” over these new models as well as new iterations for Apple TV and Apple Watch, but as exciting as those other new products may be because the iPhone is the majority of Apple’s revenue and profits odds are investors will focus their attention on those new models.

While we don’t own Apple shares, and we touched on at least one of those reasons yesterday, there are several companies on the Tematica Select List that will be affected by today’s special event – Universal Display (OLED), Applied Materials (AMAT), and AXT Inc. (AXTI) as well as USA Technologies (USAT) and Nuance Communications (NUAN).

 

Universal Display (OLED) 

As subscribers should be aware, Universal Display is a Disruptive Technology investment theme company that supplies needed chemicals and intellectual property utilized in the manufacturing of organic liquid crystal displays (OLEDs). Over the last few months, there has been much talk of ramping demand in an industry that is capacity constrained as Apple begins to adopt the technology in the iPhone while other applications (other smartphone vendors, TVs, wearables and automotive interior lighting) continue to replace existing lighting and displays with OLEDs. There are now indications that Apple is likely to introduce OLEDs in its new premium iPhone, purportedly the iPhone X.

The issue, however, is that it is being reported that the manufacturing of iPhone X device is currently capped at around 10,000 units per day and may not begin shipping until next month. This could be due OLEDs supply constraints, but if this speculation over the iPhone X turns out to be true, we could see a pullback in our OLED shares, especially following the more than 18% move in the last month alone that has the shares bumping up against our $135 price target. We continue to think that as the adoption of OLEDs continues to ramp up, we will see a step-function higher in our price target for Universal Display shares, but in the near-term, our concern is that rapid climb in the share price could hit a “buy the rumor, sell the news” wall following Apple’s event. If such an outcome occurs, our view is subscribers should continue to hold OLED shares for the long-term. If the shares retreated to the $110-$115 level, which would be a sharp pullback, we would view that as another bite at the apple for subscribers that have so far held off buying OLED shares.

  • Our price target on Universal Display (OLED) shares remains $135
  • For now, subscribers that have missed out on OLED shares should look to scoop them up between $110-$115.

 

Applied Materials (OLED) 

If the supposition that Apple’s iPhone X production is capped because of capacity constraints for OLEDs, we see that being a resounding positive for shares of Disruptive Technology company Applied Materials (AMAT). As a reminder, Applied not only manufactures semiconductor capital equipment (the machines that make chips) it does the same for displays, including OLEDs. Applied has been rather frank about the robust demand for OLEDs, and it remains one of the reasons we are bullish on AMAT shares. Others include rising memory demand as well as ramping in-country semiconductor capacity in China.

  • Our price target on Applied Materials (AMAT) shares remains $55.

 

AXT Inc. (AXTI)

We would be surprised to hear Apple talk about 5G wireless technology, which would require several additional layers of RF semiconductors, largely because most wireless carriers like AT&T (T), Verizon (VZ) and T-Mobile USA (TMUS) are still testing the technology. If, however, the Apple Watch is updated to include LTE wireless technology, that would be a source of new demand for RF semiconductors, like those from Skyworks Solutions (SWKS) and Qorvo (QRVO). In turn, that means those companies, as well as other RF semiconductor suppliers of Apple’s, would require additional compound semiconductor substrates from AXT Inc. (AXTI). While we still see the eventual deployment of 5G networks that will drive incremental RF semiconductor demand as the key driver longer-term for AXT’s business, incremental demand from devices like Apple Watch is certainly welcome.

  • Our price target on AXT Inc. (AXTI) shares remains $10.50

 

USA Technologies (USAT) & Nuance Comm. (NUAN)

Finally, during today’s presentations, we’ll also be watching and listening for incremental news on USA Technologies (USAT), an Apple Pay partner, as well as Nuance Communications (NUAN). In iOS 11, Apple will continue to expand the services offered through Apple Pay, and we expect to hear at least some usage statistics from Apple CEO Tim Cook today. With Nuance, voice continues to become the new interface of choice across new applications from smart speakers to chat-bots, like those being rolled out by Google (GOOGL), Facebook (FB) and yes, Apple, and that keeps us bullish on NUAN shares.

  • Our price target on USA Technologies (USAT) shares remains $6
  • Our price target on Nuance Communications (NUAN) remains $21.

 

 

 

Why we’re nonplussed on Apple even if the iPhone X is Awesome

Why we’re nonplussed on Apple even if the iPhone X is Awesome

While we too are interested in what Apple (AAPL) will be unveiling tomorrow, we’re not in the camp that expects the company to deliver a “shock and awe” presentation as it showcases its latest and potentially greatest iPhone model. Make no mistake, Apple’s iPhone business is impressive given its market share, margins, and cash flow generation, and it’s a device that many of us, including us here at Tematica, could not live without. The issue is the iPhone appears to be an increasingly iterative one in a market that is plagued by slowing growth and reliant on the upgrade cycle.

The reality is that while Apple will likely continue to enhance the iPhone, and pick up incremental share along the way, it’s no longer the disruptive device that redefined the company and the category. Rather, given the size of the iPhone business, relative to Apple’s revenue, profits, and cash flow, it’s one that it needs to fight and keep up with product upgrades, even as it has ratcheted up its R&D spending in 2016 and 2017. When we’ve seen such activity at Apple in the past, it has often led to new products and new product categories, which keeps us hopeful for the long-term. That said, Apple isn’t the only one that is ramping its R&D spending as our Connected Society theme continues to disrupt existing business models. We’d point to Amazon (AMZN) as the innovator to watch.

 

What We Can Expect to Hear from Apple

The excitement and rumor mongering over the last few months will soon be over tomorrow, September 12, as Apple will unveil it latest iPhone model or potentially models. Also, if the internet chatter is to be believed, upgrades for its Apple TV and Apple Watch products will be on presented as well.

Recent software leaks suggest the unveiling of several iPhone models, with at least one of them including new features in the device itself — things such as Face ID and augmented reality as well as an organic light emitting diode display (OLED). Aside from the hardware, there will be a bevy of new features associated with the latest version of the iPhone operating system, iOS 11. Candidly we’re not all that sure about the “Animoji” feature that uses the 3D face sensors to create custom 3D animated emoji based on the expressions you make into the camera. Our thinking is this feature could be like steroids for the selfie market. Rather than digress, we are very excited about the productivity features inside iOS 11 and what they mean for the iPad. We’ve been beta testers of the iOS 11 on our own iPads, and the improved split screen capabilities alongside true drag and drop, at least in our view, are going to make the iPad what many hoped it would be several years ago — a perfect device for working while on the go.

As great as the new iOS and other new products are likely to be — like the purported Apple Watch with built in LTE connectivity —, the big kahuna at the event will be the iPhone, and it is expected to come along with just as big of a price tag. While there have been many headlines discussing the potential $1,000 price tag for Apple’s new high-end smartphone, let’s remember there are a variety of financing mechanisms from mobile carriers like AT&T and Verizon Communications as well as Apple’s own iPhone financing program.

Yes, some will balk at upgrading to the iPhone X because of its price or lack of a “wow-factor”, but we also know there is a cohort of consumers that see owning the latest Apple device as the latest status symbol for our Affordable Luxury investing theme. We also expect Apple will once again under-produce relative to initial demand, magically once again leading to the latest and potentially greatest iPhone being sold out. Make no mistake, we here at Tematica love all the Apple products we have, and we have plenty of them, but there is no easier way to stock out a new product than to restrict its initial supply. Of course, this only adds to the allure of being an early adopter, much the way until fairly recently spotting a pair of  Apple’s Air Pods has been akin to seeing a unicorn.

We are not surprised to see Apple potentially bringing multiple models to market as it looks to target share gains with the rising middle class in markets such as India and China as well as other more price-sensitive emerging economies. With the iPhone, likely the first internet connected device to be had by a person in these geographies, the device is a beachhead in which Apple can leverage its sticky ecosystem of products and services, in particular, its Apple Pay feature. If Apple is as successful as it has been in the U.S. and other developed markets, it’s a large opportunity for the company as well as shareholders.

The issue with Apple’s global expansion plans for the iPhone is that larger adoption of products and services takes time, and this means that if Apple is successful with these new iPhone models it will continue to be a trapped by its own success. By this we mean consumers flocking to the latest model in droves during the first six months of its release, only to see sales fade as potential buyers wait for the next new model to be had. If this cycle remains, it likely means Apple remains a seasonal business tied to the annual introduction of iPhone models… at least until it introduces either a new product category or an existing business segment delivers a new breakout product that turns the business mix on its head. Given the size of the annual iPhone business relative to the sizes of the Mac, iPad, Services and Other Products business segments, the latter is a daunting task to expect.

Perhaps the greatest risk to the new iPhone is the possibility that between Apple iOS beta software program and the annual rumor mongering, not to mention a disgruntled employee or two, much of what’s been slated to be shared for the new model has already been leaked. This could lead to a meh reception of what has been touted as a “make or break product for Apple.”  In other words, without an unexpected new, new thing to further implant Apple in our Connected Society investing theme, Apple shares could fall victim to “buy the rumor, sell the news” following tomorrow’s special event.

Once again, the herd catches up on Universal Display (OLED) shares

Once again, the herd catches up on Universal Display (OLED) shares

After languishing for several weeks, shares of Disruptive Technology company Universal Display (OLED) shares over the last two days popped $16, or more than 14%, to finish close last night at $127.10. The catalyst for the move was Deutsche Bank initiated coverage on the company with a Buy rating and a price target of $135, in line with our own.

While we like the herd catching up to our way of thinking, the surge in the shares comes with less than two weeks until Apple’s (AAPL) next iPhone event on September 12. We suspect over the next two weeks the iPhone rumor mill will be once again cranking up, with much chin wagging over the number of models, form factors and how many models will be employing an organic light emitting diode display. This likely means that at least in the short term, OLED shares are likely to melt higher, but as we’ve seen many, many times the devil is in the details when it comes to Apple’s new products. That means expectations in the near-term could get ahead of themselves, and we note this with 6% upside to our $135 target.


Make no mistake, we continue to see a bright future ahead for Universal Display and its organic light emitting diode chemicals and IP business over the coming quarters as the number of applications climbs alongside increasing screen sizes for smartphones and TVs. This has us long-term bullish on the shares, and while it’s likely that we might have to raise our price target on OLED shares again before the end of 2017, the risk we run in the very short-term is the shares are ahead of themselves at least temporarily.

Could this result in a “buy the rumor, sell the news” set up given Apple’s upcoming event? It’s possible, but given the medium- to longer-term growth prospects, we would see that as an opportunity for those that have missed out on scooping the shares thus far. As we’ve shared in the last few weeks, the $110-$115 share price band makes for a compelling proposition on risk-to-reward trade-off for patient investors. As new data becomes available, we’ll incorporate it into our thinking, including our price target.

  • At current levels, subscribers should “Hold” Universal Display (OLED) shares rather than commit fresh capital.
  • Our price target remains $135, but given expanding market applications for its products and licensing business, we’re inclined to be owners of the shares for the medium to longer term.
Samsung Electronics confirms our thesis on Applied Materials

Samsung Electronics confirms our thesis on Applied Materials

 

Given all the attention that organic light emitting diode displays are getting ahead of Apple’s (AAPL) pending launch of its next iPhone, it’s understandable that Applied Material’s (AMAT) display business would be the center of attention. Early this morning, however, Samsung Electronics confirmed the other key drivers behind our bullish stance on AMAT shares – ramping semiconductor capital spending to not only meet growing global demand for chips but also China’s intent to become a key manufacturing hub for chips.

With Samsung accounting for 12%-18% of Applied revenue stream over the last three years, we see Applied as very well positioned to capture capital spending dollars at Samsung for capacity in China as well as around the globe in the current and coming quarters.

  • Our price target on Applied Materials (AMAT) shares remains $55.

SEOUL (Reuters) – Samsung Electronics Co Ltd expects to invest $7 billion over the next three years to expand its NAND memory chip production in China’s northwestern city of Xi’an, the South Korean tech giant said on Monday. In a regulatory filing Samsung said it approved $2.3 billion of the expected investment of $7 billion on Monday.

The firm accounted for 38.3 percent of global NAND flash memory chip revenue in April-June, the latest data from researcher IHS showed.

China is trying to develop its own memory chip producers but it is likely to be several years before they can compete with existing makers, analysts said. Samsung Electronics said a memory chip boom that propelled it to record profit in the second quarter was likely to continue in the July-to-September quarter.

Source: Samsung Electronics to invest $7 billion to boost China NAND chip output

Applied Material’s Outlook for OLEDs Boosts Our Universal Display Price Target

Applied Material’s Outlook for OLEDs Boosts Our Universal Display Price Target

This morning our shares of Disruptive Technology play Universal Display (OLED) are once again climbing higher. We attribute this to the bullish comments that compound semiconductor capital equipment company Applied Materials (AMAT) shared on the organic light emitting diode market on its earnings call last night. Given the current industry shortage for organic light emitting diode displays, AMAT has been a company to watch for potential capacity increases, and AMAT signaled that in a big way last night when it said,

  • “…In the past few months, our view of display spending has strengthened further. We now see customers increasing their investments by around $3 billion in 2017, $1 billion more than we thought in November. Our early view of 2018 is also positive.”
  • “50% of our demand going forward for this year is new customers for the mobile OLED” with orders improving across all of its mobile OLED customer base.

Taken together, these comments confirm the growing adoption of organic light emitting diode displays in the mobile market, principally in smartphones. Reading between the lines, we suspect part of the large increase from “new customers for the mobile OLED” is a thinly veiled reference to Apple (AAPL) and its 2017 iPhone refresh. Looking past mobile, we continue to see growing demand for this disruptive display technology from TV and wearable applications as well as those in Internet of Things applications.

On the back of this news, we are boosting our price target on OLED shares to $80 from $68, which offers upside of just over 10 percent from current levels. Our next catalyst for the shares will be when Universal Display reports its quarterly earnings on Feb. 23. Given the industry developments, we expect the company to offer a bullish outlook for 2017 and beyond. Even so, we’d need to see either upside in the shares in the range of $85-$90 or a pullback below $65 to warrant a Buy rating on OLED shares.

  • We are maintaining our Hold rating on OLED shares even as we bump up our price target to $80 from $68.
Universal Display Shares Feel the Apple Halo Effect

Universal Display Shares Feel the Apple Halo Effect

Today, shares of Disruptive Technology company and Tematica Select List resident Universal Display ([stock_quote symbol=”OLED”]) popped and closed the day up just under 5% to close at $70.35. There were several catalysts behind the move including more chatter over Apple (AAPL) moving its next iteration of the iPhone to organic light emitting diode display technology, and a new Buy rating at investment firm Susquehanna. From our perspective, the former represents more confirming data points behind our thesis on OLED shares, and we certainly love it when a member of the Wall Street herd catches up to what we’re doing over here at Tematica.

Now let’s get to that Apple chatter… The Korean Herald is reporting that Samsung has signed an agreement with Apple to provide 160 million screens for the Apple iPhone 8. Keep in mind that Apple shipped 211 million devices last year and 231 million in 2015. This means Apple could be moving more quickly to the new screen technology than previously thought — a positive for our OLED shares given that Samsung is one of Universal Display’s key customers and licensees.

Also dropping today was a new report from Bloomberg saying Apple is considering Chinese company BOE Technology as a potential organic light emitting diode supplier for “upcoming iPhones.” With BOE currently building two organic light emitting diode facilities in the China province of Sichuan, odds are any potential supply to Apple will be for 2018. Given supply constraints for organic light emitting diode displays that could limit Apple’s use of the technology in one new version of the iPhone this year, we’re not surprised by Apple trying to lock up additional capacity ahead of it coming online. More organic light emitting diode capacity is likely to translate into more chemical sales for Universal Display and bode well for greater licensing revenue as well.

  • We continue to rate OLED shares a Hold and our $68 price target is under review.

We’ll be tuning into semiconductor capital equipment company Applied Material’s (AMAT) December quarter earnings conference call to get the latest view on organic light emitting diode industry capacity expansion plans.

 

Apple to get into the Content is King theme

Apple to get into the Content is King theme

Apple and the iPhone have been at the forefront of our Connected Society investment theme and Apple Pay lands the company in our Cashless Consumption theme as well. For a long time, Apple has held off creating original content preferring instead to be a platform via iTunes and its app ecosystem for others to distribute their content (Netflix on iPads, iPhones and Apple TV as an example). With the battle for the device consumer heating up, Apple is taking a page out of Content is King companies Disney (DIS) and Comcast (CMCSA) and moving into content to shore up its competitive position. We’ve seen Netflix do this and Amazon (AMZN) is charging ahead as well. From a thematic sense, if Apple can get the programming right, three thematic tailwinds are better than one or two.

Apple Inc. is planning to build a significant new business in original television shows and movies, according to people familiar with the matter, a move that could make it a bigger player in Hollywood and offset slowing sales of iPhones and iPads.These people said the programming would be available to subscribers of Apple’s $10-a-month streaming-music service, which has struggled to catch up to the larger Spotify AB. Apple Music already includes a limited number of documentary-style segments on musicians, but nothing like the premium programming it is now seeking.

Source: Apple Sets Its Sights on Hollywood With Plans for Original Content – WSJ