Apple Shares Rally in Anticipation of Next Week's Developers Conference. Will Wall Street Be Disappointed Again?

05/27/2014 5:10 pm EST

Focus: TECHNOLOGY

Jim Jubak

Founder and Editor, JubakPicks.com

Per usual, there is a tremendous buildup of anticipation as next week's developers conference inches closer, but MoneyShow's Jim Jubak thinks patience may become a virtue for investors this time around.

Shares of Apple (AAPL) have got a big case of the anticipations.

The company holds its annual Worldwide Developers Conference (WWDC) in San Francisco from June 2 through June 6. Apple uses the event to tell give developers a heads up on new Apple products so they can write software for those forthcoming devices and operating systems. That always provides just enough details about Apple’s new products to tantalize consumers and to create buzz with investors.

This year is no exception: the shares are up 20.7% from the April 15 low and 6.7% from the May 18 dip.

With the shares trading at $625 on May 27 at 3:30 P.M New York time, the easy gains are in the share price on anticipation of the event. For Apple to challenge my $650 target price the company is going to have to deliver some steak to go with the sizzle next week. (Apple is a member of my Jubak’s Picks portfolio.)

It’s almost certain that we’ll see an iPhone 6 with a bigger screen this fall. Suppliers Foxconn and Pegatron have leaked news that they’ve received orders for a 4.7-inch and a 5.5-inch iPhone for 2014. Either of those sizes would be a big increase over the current 4-inch screen and the bigger 5.5-inch model would leapfrog Samsung’s 5.1-inch models. The question here is timing, with some rumors saying that due to delays in getting yield up, Apple will introduce the 4.7-inch model in the fall with the 5.5-inch model to come later in the year. That kind of staggered introduction probably wouldn’t sit well with Wall Street, which would see it as reducing and delaying iPhone sales.

What else might we find out from WWDC?

Apple will almost certainly preview a new iOS 8 mobile operating system and an OSX 10.10 operating system for Macs. Rumors for iOS 8 focus on improvements to Siri that would give third-party developers greater ability to write apps for Apple’s voice-activated interface and improved maps. iTunes Radio, rumors say, might be turned into its own app instead of being bundled into the existing Music app. (Developers will also get a dog and pony look at Apple’s recent acquisition of Beats.) Apple has a mobile payments system in the works but I think that won’t be promised at this WWDC.

A redesigned Apple TV was once rumored to be scheduled for April, but a release date has been pushed beyond WWDC. The redesigned set-top box would have support for iOS games and the company’s App Store, according to macrumors.com. The iWatch looks like a late 2014 product. Upgrades to the MacBook line that would add a Retina display to the 12-inch MacBook and still be slimmer than the existing MacBook Air might get a bit of initial buzz, but upgrades to the Mac lines are expected in October and don’t add up to an introduction of the big new product category that Wall Street thinks Apple needs.

If, as was rumored right after Memorial Day, Apple can introduce technology that would turn the iPhone into a platform for controlling lights, home security systems, and household appliances that would certainly get developers talking. (Such a device would open up big new markets for them to write apps.) Supposedly, the new technology would move Apple from its current use of Bluetooth technology to near-field communication using radio signals. Whether that attempt to break into the market for the Internet of Things (up against competitors such as Google) would be enough to answer Wall Street’s questions about the source of Apple’s future growth will depend on the company’s ability to articulate a competitive advantage over a company such as Google. The big question for Apple and Google is, can any company give potential consumers enough comfort about the security of their data so that this market will take off?

I wouldn’t chase Apple above $625 in the short-term. These days, anticipation about Apple products turns quickly to disappointment. I think it’s better at this point to see what Apple actually announces at the WWDC and then make your buy/sell/hold decision from there.

Full disclosure: I don’t own shares of any of the companies mentioned in this post in my personal portfolio. When in 2010 I started the mutual fund I manage, Jubak Global Equity Fund, I liquidated all my individual stock holdings and put the money into the fund. The fund did not own shares of Apple as of the end of March. In preparation for closing the fund at the end of May, as of the end of March I had moved the fund’s holdings almost totally to cash.

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