Investor markets demonstrate faith in Apple’s product development ability

Analysts at US investments firm Cantor Fitzgerald last week predicted that Apple will become the world’s first $1 trillion company before the end of the year. This anticipated jump in the value of Apple’s stock (to $180 per share) would take the company to more than twice the size of the next biggest public company (Exxon Mobil) and to almost more than three times the size of Google.

These projections reflect positive market sentiment on three main factors: higher than expected sales in China, the imminent launch of AppleWatch and the company’s badly-kept secret of R&D into driverless cars.

What is interesting is that only one of these factors actually relies on something the markets can assess; Apple’s sales are up 70% year-on-year in China – far higher than the expected rate of growth. On the other hand, the other two factors rely on an assumption that Apple’s first foray into wearables and any future driverless car offerings will be successful.

There are many sceptics about the likely commercial success of wearables and even more so driverless cars. Yet the faith investors place in Apple’s ability to develop products that resonate with consumers overcomes this scepticism.

Apple’s form of innovation relies on successfully identifying unknown consumer needs and developing beautiful products to meet those needs. These products have typically gained such traction with consumers that they become part of everyday life. The combination of phone, music player and personal computer within the iPhone is the perfect example of this type of innovation. The creation of a market for tablets through the iPad is another example.

But the move into wearables – and even more so into driverless cars – poses the greatest challenge yet to Apple’s almost unblemished innovation record. These are harder propositions to deliver for a company which ultimately specialises in computers, not watches or cars. They are a departure from Apple’s bread and butter.

Has Apple correctly pre-empted the needs of global consumers once more? Or has Apple over-extended itself, departing too far from its speciality, and will these products therefore fail?

Investors are putting their faith in Apple’s track record of brilliance. But difficulties for AppleWatch over the next two years could burst that bubble and very quickly return the world economy to one without a $1trillion company.

FreshMinds is an award-winning insight and innovation consultancy, helping global brands drive growth across three broad areas: consumer behaviour and market assessment, product development and communications development.

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