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How High Can These 3 Techs Go?

09/29/2011 2:00 pm EST


Hilary Kramer

Editor, GameChanger Stocks

Quite a bit higher, says Hilary Kramer of GameChanger Stocks, who points to elements of Apple, Google, and Amazon’s business that are just beginning to be tapped.

Hilary, Apple (AAPL) seems to be the apple of everyone’s eye. Tell me what’s going on there.

Well, Apple has the backlog of products, the customer loyalty, the appeal across the board.

And the big catch now is that any new company starting out, whether it be in technology…but even on Wall Street, they’re starting to convert over. Instead of the PC platform, they’re using a diversified Apple Mac and then handheld device with the iPhone and the iPad platform. That is the game changer for Apple.

Also, the globalization of Apple. We all think, how could Apple get any bigger than it is? But it can, because if you look at the actual penetration of users globally, we could triple the number of people who actually use Apple and still be under 10% worldwide, so you can think of the potential that’s there for Apple.

Also, as they continue to roll out new products, revenues are growing, and you have users who will step up to the next level. So that’s very important. It’s not just new acquired customers, but having continued purchasing from those who are already Apple loyalists.

And what does this tell us about the whole sector in technology, Apple having leapfrogged over Wal-Mart (WMT), which was retail, and even Exxon Mobil (XOM), which is the old oil and services stock. Does this say technology is what’s leading us now?

Karen, I do believe that that’s what the message is around Apple, which is technology and where we are right now in the stages of development worldwide. It’s about tech-driven innovation, and that’s where Apple comes in.

Tell me more about the innovation and what’s ahead. We do know a lot with the iTunes and the downloads and things like that. Do they have more potential?

Apple does have the potential, but there the potential is really going to be in the interfacing amongst their own products.

Now what I’m watching on every quarterly earnings report, the one red flag—because there is with every company—is on the Mac sales. We have to see those start to accelerate more because the iPad is just like the PC is going away.

Now the Mac is still very popular and growing, but we need to see some kind of interface that makes it appealing for that to see 100%-plus kind of growth projectory. It might not be over a year, but with the actual computers themselves, but it’s really about businesses adopting the use of Apple, because as popular as it has always been amongst the web designers and the art set, it hasn’t really taken off until now amongst traditional business, and this is going to be the change.

Well, what about Google (GOOG)? Apple has kind of almost supplanted the need for the Google search engine with all their apps. Is there any hope for Google?

Oh yes, because Google is still a very important company, and one that I’m very bullish on. I believe we could see Google one day be an $800 stock.

The reason is because of Google+. Google+ is the social media network. It is the Facebook of tomorrow. Just like we had Myspace, Facebook came along and Myspace was really supplanted by Facebook. Google+ allows the user to have more of a sense of privacy to pick and choose who can see information, as well as has that sense of kind of customization that you don’t have with Facebook.

Then, you also have the interchange because you have Gmail, Google documents, Google albums, Google…

Google Earth.

Google Earth, right, so when all of that comes together the potential is there.

Now, even though Google’s market cap seems like how could it get any bigger, if Facebook is worth $70 billion and even if Google+ just simply competes with Facebook, you’re looking at another $30 billion to $40 billion of market cap.

Any other tech stock that’s lying under the radar that you like?

Amazon (AMZN), and I know, on certain metrics one would say that Amazon is an expensive stock.

But if you take a look quarter to quarter, look at Amazon’s investments that they’re making in the fulfillment centers around the world—including two that were just completed outside of Shanghai, which allows the delivery of their products within six hours, because it’s 30 km outside of Shanghai. The fulfillment centers around Europe.

These margins were just looking too narrow because of the investment, but that investment will pay off because Amazon, as it gets larger, is able to lean on some of its third-party providers.

So, Amazon is always selling for their third parties, and they’re able to extract a larger percentage of fees and therefore pass it on with lower costs to the users of Amazon. And so much of the appeal of Amazon today is that it is a lower-cost provider.

So, you can compare that, Karen, to Netflix (NFLX). The reason Netflix had a poor earnings quarter for their most previous quarter is that they raised their prices, and then they saw churn. Amazon continues to gain users, because you know that you can get the best price.

Netflix angered a lot of people.

It really did, yes.

Hilary, do you own any of the stocks you mentioned?

I own Google.

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