New iPhone to boast blazing speed, high-res camera

Apple is later than usual with the update of its flagship smartphone, but the features may make it worth the wait for investors and consumers alike.

By InvestorPlace Jun 22, 2011 10:48AM

By Jeff Reeves, Editor of InvestorPlace.com


investorplaceIt's summer, and that typically means legions of Apple Inc. (AAPL) fans are worked into a lather about the latest iPhone launch. Since 2007, there has been a snazzy new model of the iconic smartphone released between mid-June and mid-July, just like clockwork.


Not this year. Turns out iPhone fans won't get their paws on a new gadget until September.


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That's the bad news. The good news is that Apple is supercharging the speed of the device, jazzing up the camera and adding other bells and whistles. That should make the wait worth it to many consumers, it and could signal that summer will be a big buying opportunity for investors as Apple's stock is unfairly oversold because of the delayed iPhone release.


First the details on the new phone: According to insider reports compiled by Bloomberg, the new iPhone will boast an A5 processor. That's the same chip that powers the iPad 2, putting the smartphone on par with tablets when it comes to performance. That's quite an aggressive move, one that further blurs the lines between smartphones and computers as we used to know them.


Another big development is the inclusion of an 8-megapixel camera, compared with a 5-megapixel camera in the previous iPhone. On top of that, the iPhone will boast a higher-resolution display. Clearly Apple is trying to make its smartphone's image functionality a centerpiece and a feature that can compete with many digital cameras.


Investors should take note. While iPad 3 rumors have gotten a lot of attention and the recently unveiled iCloud programming has techies all atwitter, the iPhone remains Apple's top seller, accounting for half of the company's nearly $25 billion in revenue last quarter. Even a modest uptick in iPhone interest will mean big things for Apple stock.

Against all odds, Wall Street seems to be doubting the darling stock. Shares are up less than 2% so far in 2011, less than half of the broader stock market, and AAPL has lost more than 5% since May 1. This is after a red-hot return of more than 53% in 2010 -- nearly five times the performance of the Dow Jones Industrial Average.


Some experts claim Apple has been overbought in the past several months, and it appears many investors agree. But in my opinion, there has never been a better time to buy Apple.


Consider this: Though Apple's price target was technically reduced by Oppenheimer this week, the firm maintained is "outperform" rating and cut its long-term target from $450 to $430 a share. Shucks, that's only a 33% gain. What ever would investors do with such meager returns? And Morningstarrecently added Apple to its exclusive list of five-star stocks with a target of $475 -- about 52% above current valuations.


Those high targets are the result of a host of data proving Apple's strength. Consider that last quarter it beat earnings expectations by a jaw-dropping $1 a share. Or that its forward price-to-earnings ratio is about 11.4 -- far from the nosebleed valuations for other trendy tech stocks like Netflix (NFLX), which boasts a forward P/E north of 38, or Amazon.com (AMZN), which is hovering around 50.


The list of reasons to believe in Apple is long. Read a complete article on why buying Apple stock is free money now.


It's worth noting that Oppenheimer's price-target reduction was due to the late release of the iPhone this year. There's no doubt the loss of a few months of sales for its flagship phone will take a big bite out of Apple's revenue in 2011. And for folks who are into charts, Apple technical analysis shows the stock may continue to see headwinds in the short term.


But if the flashy new features of the iPhone are a hit, it could find dramatic demand that makes up for any late release date, and investors who buy now will be richly rewarded.


Jeff Reevesis the editor of InvestorPlace.com. As of this writing, he did not own a position in any of the stocks named here. Follow him on Twitter via @JeffReevesIP and become a fan of InvestorPlace on Facebook.


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1Comment
Jun 22, 2011 2:09PM
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Smile Phone freaks will get their holiday rush from yet another overpriced status symbol.   Wonder what the next big thing will be?  I'd really like to see interest rates go to 8-10% next year.
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