“While Apple still has growth potential in its existing markets, we believe entry into new areas (TV sets, “Genius Squad”, et al) present market cap growth opportunities,” Mr. Um said. “We expect Apple to enter the TV set market and if it achieves similar success as in the handset and PC markets, we see potential for an incremental $50 to $100 billion in market cap.”
Mr. Um added that much of Apple’s increasing value is coming at the expense of its competitors. “While Apple’s increase in market capitalization is partially a function of the industry growth, the greater majority appears to be from a shift in market value away from incumbent vendors. This appears to be true particularly for the handset market but also evident in the PC market,” he said.
The need for a “Genius Squad,” as Mr. Um calls it, would be to offer on-site customer support and product installation. Specifically, he sees the service as an important component for a push into the television market to handle TV deliveries, set up and wall mount installation.
These mobile Geniuses would also handle on-site repairs, network setups, training, troubleshooting, and other customer service related needs.
Mr. Um likens these mobile Geniuses to Best Buy’s Geek Squad. “In our view,” he said, “one primary differencebetween a Geek and a Genius is that a Geek has a car.”
While there isn’t any evidence that Apple is planning on launching its own Genius Squad, there are at least hints that the company could be slowly moving in that direction.
Apple, for example, used to act as a liaison to connect Apple Consultant Network members with potential customers. Now, however, Apple controls the entire process, and even curtails the contact ACN members have when interacting with the customers they connect with under their own business name.
The changes Apple has made to its ACN to customer connection system could be the first step in the move to a Genius Squad. It could also, however, simply be another way Apple is trying to control the overall customer experience.
Mr. Um is expecting Apple will move into the TV market by teaming up with an existing manufacturer to add Apple TV features to highlight services like the iTunes Store. He also expects Apple won’t be releasing its own branded TV any time this year. Instead, he sees Apple focusing on gathering more entertainment content before jumping into the TV market.
“In time, we expect Apple to secure enough content (TV shows, movies, etc) to enter the television set market with enough differentiation without having to rely on others for content,” Mr. Um said. “In fact, we would look to its current Apple TV product as the precursor to a television set — only when Apple TV matures and grows in functionality and content do we believe it could make its way into an actual television set.”
Mr. Um is maintaining his “Buy” rating and $510 target price for Apple’s stock. Apple is currently trading at $356.84, down 2.87 (-0.80%).