The article was written by Motek Moyen Research Seeking Alpha’s #1 Writer on Long Ideas and #2 in Technology – Senior Analyst at I Know First.

AAPL Stock Prediction

Summary:

Siri is not the as smart as Microsoft’s Cortana, Google Assistant or Amazon’s Alexa.

However, the Siri-powered $349 HomePod smart speaker is still going to be more profitable than the Amazon Echo and Google Home.

Amazon has sold 11 million units of its Echo smart speaker since its inception.

I predict that Apple will sell 10 million units of the HomePod on its first year of release. Strong sales of the HomePod could offset the decline in iPad sales.

Based on the 3-month and one-year algorithmic forecasts from I Know First, AAPL is still a buy.

I discussed at Seeking Alpha that Apple’s (AAPL) Siri is the least smart digital assistant. However, Tim Cook was still gutsy enough to unveil the $349 HomePod at WWDC 2017 event. The Siri-powered HomePod is Apple’s upscale equalizer to Alphabet’s (GOOG) $129 Google Home and Amazon’s (AMZN) $179 Echo smart speakers.

Apple emphasized that the HomePod is primarily a home music appliance that also happens to have the Siri personal digital assistant. HomePod emphasized its superior sound quality, not its utility as a smart bot whom people can ask general knowledge questions.

(Source: Apple)

Amazon and Alphabet dominate the market for smart speakers. However, my fearless forecast is that Apple will most likely rake in the most profits in this particular product category. Apple’s high-margin approach applies to the HomePod. Amazon has 70.6% share of the U.S. smart speaker market but it sells Echo devices on the cheap.

Amazon sells the Echo to gain more repeat customers for its online store. Apple, on the other hand, is selling the $349 HomePod primarily like an upscale, high-margin product. Apple has always been a for-profit hardware vendor. The Smart speaker industry ispredicted to grow to a $9 billion industry by year 2022.

The HomePod is therefore a great expansion product which could help offset declining sales of the iPad.

A Music Gadget First, Smart Assistant Second

HomePod won’t deliver the best answers to people’s general knowledge questions. However, Apple touts it will deliver a perfect listening experience anywhere it is placed in the room. This clever strategy should help the HomePod become the top-selling smart speaker. The Amazon Echo has so far achieved 11 million unit sales since its release. However, the Echo’s speaker quality is unimpressive.

The Apple loyalists who are also subscribers to Apple Music will buy the HomePod for its upward-facing subwoofer, seven beam-forming tweeters, each with its own amplifiers. A custom A8 processor does automatic real-time software manipulation to ensure the HomePod produces the best music experience.

Unlike Google and Amazon, Apple is marketing the HomePod as a music-lover gadget, not as a smart home assistant which can help you order pizza. On this note, my fearless forecast is that Apple can easily sell 10 million units of the HomePod during its first year of release.

My 10 million unit sales estimate is feasible. Apple Music has 27 million paid subscribers. Most of them will likely buy the HomePod when it becomes available. First year sales could even hit the 20 million mark if Apple makes the HomePod available immediately in other countries where it has many loyal fans.

Let Others Develop The HomePod Software Ecosystem?

Should Apple think it important, it could improve the Artificial Intelligence quality of Siri to make the HomePod more useful than just playing great music. If it can’t, then Apple should open up the platform and let third-party developers create custom software or skills for the HomePod.

If Apple TV has its app store, the HomePod also deserves an app store. The Alexa-powered Echo devices became popular because Amazon let others create skills or custom software for them. Alexa now tout more than 10,000 skills for Echo devices. Corporations wrote skills for the Alexa platform because they saw the Echo as a channel where they could connect better with customers.

Conclusion

The economic benefit of selling 10 million units of HomePod is easy to calculate. This smart speaker retails for $349 and Apple probably rakes in $100 of that as profit. The HomePod therefore could potentially contribute $1 billion in new revenue for Apple.

I am again reiterating my buy recommendation for AAPL. The HomePod’s unveiling showed Tim Cook is gutsy enough to challenge the Amazon Echo and Google Home. He knew Siri is inferior to Alexa and Google Assistant so he is marketing the HomePod as a music-first smart gadget.

Going forward, I expect Apple to create other pricey smart appliances. I bet that Apple is also now working on a Thermometer and home security camera to challenge Google’s Nest products. Selling upscale connected home appliances will help Apple reduce its exposure to iPhone sales. If Apple could execute well in its expansion to smart appliances, I expect it to again post at least 10% growth in annual revenue for the next five years.

Below is my five-year DCF Revenue Exit fair value assessment for AAPL.

(Source: finbox.io)

As always, I would like to end this article with a note that my bullish outlook for AAPL is supported by the long-term algorithmic forecasts from I Know First. AAPL’s one-year market trend signal score of 136.59 is hinting AAPL is worth adding to your long-term portfolio.

I Know First Algorithm Heatmap Explanation

The sign of the signal tells in which direction the asset price is expected to go (positive = to go up = Long, negative = to drop = Short position), the signal strength is related to the magnitude of the expected return and is used for ranking purposes of the investment opportunities.

Predictability is the actual fitness function being optimized every day, and can be simplified explained as the correlation based quality measure of the signal. This is a unique indicator of the I Know First algorithm. This allows users to separate and focus on the most predictable assets according to the algorithm. Ranging between -1 and 1, one should focus on predictability levels significantly above 0 in order to fill confident about/trust the signal.

Past I Know First Success With AAPL

I Know First has been maintaining its bullish forecast of Apple, such as its bullish article published on January 5, 2016. Despite Apple no increasing sales in its iPhones for the first time since the iPhone’s release in 2007, I Know First remained optimistic. Revenue growth from developing markets grew by 63%. Since the forecast’s release on January 5, 2016, Apple’s stock has increased by 46.24%.

(Source: Google Finance)

This bullish forecast for AAPL was sent to I Know First subscribers on January 5, 2016. To subscribe today click here.