Michael Murphy is a leading technology expert; one of the model portfolios in his New World Investor focuses on stocks that that are consider "digital dominators". Here are two that are set to release earnings on July 31.
Apple (AAPL) gained smartphone market share in the June quarter, pulling even with Samsung. Consumer Intelligence Research Partners say that Apple accounted for 36% of US activations in the quarter, compared to 63% for Android.
An RBC Capital Markets analyst just pointed out that Apple’s rapidly growing services business, including the App Store, AppleCare, iCloud, iTunes, Apple Music, Apple Pay and the recently-acquired Texture digital magazine app, could account for nearly a third of revenue and more than half of its profit by 2025.
He said: “Services is on track to become a roughly $50 billion business by 2020, and we think Apple eventually transforms from a device to a services company. By 2025, we could see Apple looking at iPhones as merely a means of expanding the installed base with the real monetization being done via services.”
Apple has 27% operating profit margins yet trades for only a bit over 10X earnings before interest, taxes, depreciation, and amortization (EBITDA).
Meanwhile, AAPL is a rated a hold based on its new iPhone X rollouts and augmented/virtual reality products. After the company reports earnings on July 31, I probably am going to have to raise my target price.
Corning (GLW) just introduced Gorilla Glass 6, the most durable smartphone glass ever. It survives drops from higher heights and has been engineered to survive multiple drops.
A recent worldwide consumer study showed that, on average, people drop their phones seven times a year, with more than 50% of the drops occurring at one meter or less. Gorilla Glass 6 is an entirely new glass composition that can be chemically strengthened to give it significantly higher levels of compression than is possible with Gorilla Glass 5.
In lab tests, Gorilla Glass 6 survived 15 drops from 1 meter onto rough surfaces and is up to two times better than Gorilla Glass 5. Under the same test conditions, competitive glass compositions, such as soda lime and aluminosilicate, did not survive the first drop.
Of course, in the real world iPhones and Gorilla Glass have survived a 500-foot fall from a helicopter, a 1,400-foot fall from a small airplane, and even a 450-foot fall from one of the tallest amusement park rides in Orlando – without a case!
Corning will report earnings next Wednesday before the open. Analysts are looking for $2.69 billion in revenues and 37¢ a share. September quarter guidance should be for $2.92 billion and 49¢.
GLW is rated a buy under $31 for the 5G cellular buildout, followed by the smartphone upgrade to use 5G services. My first target is $60 in 2020.
