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Wall Street Is Ignoring Apple Music – We Shouldn't

Companies / Apple Jul 06, 2015 - 03:25 PM GMT

By: ...

Companies

MoneyMorning.com Michael A. Robinson writes: With Apple so often on the cutting edge of technology, it is easy to treat its latest breakthroughs as the status quo for such an innovator.

That typically leaves real unclaimed value on the table when it has a new product or service in the market.


But the newest big story out of Cupertino is hardly the status quo – even for a firm like Apple Inc. (Nasdaq: AAPL).

I'm talking about the new streaming music service it has just introduced, Apple Music. It's a game changer in a market I've been familiar with since its inception.

It will also be the perfect boost to Apple's stock price as the market gyrates daily around it. Let me show you why and how you can profit….

Apple Will Upend a Mature Market

As my Strategic Tech Investor readers probably know, I've been around Silicon Valley for over three decades. And they know that, in addition to my love of technology, I'm also an avid musician.

So when Napster broke into the music scene with its free MP3 sharing platform in the late 1990s, like many fellow musicians, I was outraged that songs that artists had invested so much in creating were essentially getting ripped off and their music given away for free.

At the time, I co-founded StopNapster.com. We did our best to foil Napster by making bogus songs available that they unknowingly picked up and circulated. It was a bit of light-handed sabotage to foil a company that was well-deserving of it. And ultimately, it helped. We were even covered in The Wall Street Journal in June 2000.

Around the same time, I predicted that $1.00 singles were going to become the standard after Napster was effectively (and thankfully) shuttered. Now they are the industry norm, and the marketplace giant for purchasing songs is Apple's iTunes store.

I think Apple Music will be just as impactful.

Although music sharing is hardly new, Apple Music will inevitably dominate.

Here's why.

Apple Music starts out by essentially curating a music list, not unlike Pandora Media Inc. (NYSE: P) and its "station" approach. But Apple has the distinct advantage of access to the iTunes preferences of millions of its current users to zero in on your tastes very quickly.

It is initially free for 90 days and gives you access immediately to 30 million+ songs. It then converts to a $10-per-month subscription. That's very similar to Spotify's $9.99 for its premium upgrade, after $0.99 cents per month for three months gets you started.

That seamless integration with your iTunes account means Apple Music is much smarter than Spotify in its selections, right out of the gate. And remember, Spotify is privately held, so for the moment isn't investable for us.

Meanwhile, Pandora's stock price has been in sharp decline since early last year, topping out at just above $37 early in 2014 and closing after Wednesday's trading at just above $15.

It continues to produce negative earnings (after a brief flirtation with positive earnings for Q4 2014), and as its market cap falls along with its stock price, it's approaching less than half the valuation of Spotify's $8.53 billion.

Why Apple Is the Perfect Buy-In

Apple Music will not only benefit from its access to your iTunes preferences, but it will also boost them. So a listener can easily use the same platform to turn around and make a purchase from Apple.

The coordination of iTunes and Apple Music, with Apple's market penetration and clout behind them, will only make it more unstoppable. I have a target price of $142.85 by Labor Day 2016 – it was trading at roughly $126.50 as of Wednesday's close – and with our trailing stops in place, we have a real opportunity to cash-in on another breakthrough from Cupertino.

There's a value proposition here, too – with the market off through Q2, I think the start of Q3 is the perfect time to snap up some more Apple shares.

Source :http://moneymorning.com/2015/07/06/wall-street-is-ignoring-apple-music-we-shouldnt/

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