Here are some quick words on Apple's (AAPL) - Get Report special event on Tuesday -- it was lame! As we feared, not only did the company's latest figures show off iterative at best features, the presentation was less than enthusiastic, as was the reception by attendees at the new Steve Jobs Theater.
Candidly, when Apple began talking about its new retail footprint and then started the iPhone conversation with new colors, we had a feeling it was all about to go downhill. And we were right. What ensued was a noticeable groan, be it for the lack of compelling new features or the fact that Apple's "one more thing" -- the iPhone X -- and its $1,000 price point won't begin shipping until early November, far later than anyone had expected.
We see Tuesday's underwhelming event serving as a reminder that at least for now Apple's business remains reliant on the slower growing smartphone market. We see the new iPhone models as Apple simply shoring up its industry position.
Odds are Apple will continue to gain incremental share and generate significant cash, but the opportunity for real growth from here hinges on either a new business category, or a new must-have product from an existing one. Neither of those appears to be on the near-term horizon, and spinning out of Tuesday's event it looks like AAPL shares will fall victim to "buy the rumor, sell the news."
Now, for the better news: Just because true growth is lacking at Apple, there were several announcements on Tuesday that bode rather well when it comes to two Trifecta positions -- growth for Universal Display (OLED) - Get Report and Applied Materials (AMAT) - Get Report .
Regarding Universal Display, Apple shared it is adopting organic light emitting diode displays in the iPhone X with its Super Retina Display; however, again, that product is not set to ship until early November. This likely means a modest push out in expectations. But we see that as modest bump in the road for the capacity-constrained organic light emitting diode industry that is hog tied due to demand from not only Apple, but other smartphone vendors, as well as other applications (TVs, wearables, interior automotive lighting).
If Action Alerts PLUS charity portfolio holding Apple follows its historical pattern -- and we think it will -- we expect the Super Retina Display to make its way to other iPhone models as well as those for iPads as supply eases and newer iterations are introduced.
While Apple's didn't specifically point to a display capacity shortage as the culprit behind the later- than-expected ship time for the iPhone X, its timetable when paired with recent comments from Applied Materials certainly suggests the industry remains constrained relative to demand.
Moreover, with applications such as TVs calling for larger display sizes vs. those for smartphones and wearables, the industry is likely to be constrained for some time, especially as more TV vendors look to bring more models featuring that technology to market over the coming quarters. We see that as a good problem for Applied and its display equipment business. The next update from Applied will be at its 2017 Analyst Day on Sept. 27. We expect an upbeat tone, not only for its display business, but from its semiconductor capital equipment one as well.
As we move into fourth-quarter 2017, and with increasing clarity on the growing number of applications, we will be revisiting our $135 price target for OLED, odds are with an upward bias. At current levels, however, the shares remain a Two.
We continue to be bullish on Applied Materials shares with our $55 price target, keeping our One rating intact.
This commentary was originally sent to Trifecta Stockssubscribers at 08:45 on Sept.13.
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, which Chris Versace co-manages, is long AMAT, OLED. Versace has no position in any of the securities mentioned.