The inbox is overflowing with story requests today, but we’re going to start things off with the most-requested teaser pitch of the last few days, Ray Blanco’s “Apple Fi” ad for Technology Profits Confidential ($49/yr).
At first I thought this was just another rewording of his older “Halo-Fi” pitch, which was about the OneWeb satellite constellation (that’s still a private company, but my best guess was that he was primarily recommending Softbank, OneWeb’s largest investor — and OneWeb scrapped a bunch of launches over the past year or so and just filed for bankruptcy in March, so we get yet another black mark on Softbank’s ledger).
That ad ran for almost three years and still pops up every now and then with a new invented “deadline” for the day you’d be able to buy $7/month internet from these satellite folks… but this new ad is different… and not just because SpaceX has apparently eaten OneWeb’s lunch.
The general idea is the same, that you’ll be getting your internet access from satellites, but this time Blanco’s saying you’ll be accessing a network run by Apple that covers the globe, and that Apple will be charging you only $4.99 a month.
Don’t hold your breath on that, the technological challenges for delivering a high-bandwidth satellite data service to everyone on earth are pretty wild and I expect progress will move a lot more slowly than Blanco is hinting… but we’ll dig into the details and try to figure out just what he’s talking about this time, and which stocks he’s hinting at as plays on this new Apple satellite network (which, to be clear, does not exist at the moment).
Here’s a little taste of the ad, which has Blanco taking credit for urging investment in 5G back in 2011 but says that this next big thing is going to be the “5G Killer”…
“Please pay very close attention to what I’m about to share with you.
“Because as you’re about to see, anyone buying 5G stocks could soon get burned.
“That’s because a much bigger new technology — one I call the ‘5G Killer’ — could soon make 5G technology obsolete.”
And as these ads so often like to do, presumably because it makes the newsletter seem super smart for looking up stuff that most people don’t understand, they also trot out an image of a US Patent…
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“What you’re looking at is Patent No. 20130271317.
“Filed on behalf of Apple, Inc., this patent reveals one of the biggest tech breakthroughs of our time…
“One that could put giant service providers like AT&T, Verizon, Sprint, T-Mobile, and others out of business…
“And, more importantly, make 5G technology obsolete overnight.”
That sounds like a bit of a stretch, to be kind… yes, an Apple employee did get issued this patent in 2015, but it seems primarily focused on testing systems for satellite navigation in devices — so in Apple’s case, testing how the GPS on your iPhone works. I am not an expert on this at all, so maybe I’m missing something (you can see the patent here if you’re curious) … but the patent seems to be just a little flair thrown in to build the excitement in the ad and provide some gravitas.
Blanco lays it on pretty thick, too, telling us that this news of “Apple-Fi” will be coming soon…
“Apple, Inc. may be just days away from announcing plans for an entirely new era of modern internet…
“One that will deliver high-speed internet to everyone worldwide…
“Without requiring a modem, towers, cables, or anything like that…
“… almost nobody else in the world knows about Apple’s top-secret project yet.
“But on June 22, I believe this ‘5G Killer’ will be revealed to the world…
“And when it is, it could go down as one of the biggest market stories of 2020….
“Mark My Words: What’s Coming Next Is a Radical New Internet, Powered Directly By Apple, Inc.”
And, of course, this secret news is about to make you filthy rich — and Ray Blanco is the only one who knows about it…
“I’ll be showing you the undeniable proof in just a moment…
“I’ll even show you exactly how to get in front of this ‘Apple-Fi’ revolution…
“Potentially turning one small investment today into the kind of wealth most people only ever dream of.”
And he even gets really detailed about what’s going to be offered…
“What is ‘Apple-Fi’?
“In short, Apple will soon cut out traditional wireless networks and internet providers…
“And beam fast, reliable, unlimited internet through the air… directly to your device.
No more cell towers… and no more routers….
“Whether you’re walking down Fifth Avenue in Manhattan or in a remote rural cabin,
you’ll always be connected to high-speed internet.
“The most shocking part of all this?
“Well, judging by similar Apple products…
“Like Apple TV, which costs $4.99 per month… and Apple Arcade, which again, costs $4.99 per month…
‘Apple-Fi’ may cost you just $4.99 per month.”
Did you tilt your head at that last part? This global satellite data network for always-on connectivity might cost you only $4.99 per month! And why did Ray Blanco settle on that specific price point? Um, because some of Apple’s other products cost that much. That’s kind of like saying Ford will sell me a new car for $29, because that’s what my local dealer charges for an oil change.
But he lays it on even thicker:
“While other internet services like Verizon and AT&T charge an average of $132 or more per month…
“Starting just days from now, you — and everyone else around the world — could be able to slash your bill down to as little as $4.99 per month.”
So what’s going on here?
Yes, it’s true that Apple has what I’d characterize as probably a “skunk works” project doing something with satellite communications. And that division generated a fair amount of attention back in December, because Bloomberg covered the story — and in case you’re overly excited about that “June 22” date, here’s the Bloomberg headline from December 20, 2019:
And here’s the quote from that article that spread wide and far, leading to lots of people getting excited about the potential:
“The Cupertino, California-based iPhone maker has about a dozen engineers from the aerospace, satellite and antenna design industries working on the project with the goal of deploying their results within five years, said the people, who asked not to be identified discussing internal company efforts. Work on the project is still early and could be abandoned, the people said, and a clear direction and use for satellites hasn’t been finalized. Still, Apple Chief Executive Officer Tim Cook has shown interest in the project, indicating it’s a company priority.”
So yes, although there is something possibly ‘real’ there, keep firmly in your mind those key numbers: “about a dozen” engineers; and “five years.” If Bloomberg’s reporter is getting good information, this is a possible future project but not at all ready for prime time — like all technology companies Apple has a lot of early-stage R&D projects and initiatives that don’t end up going anywhere, or that take far longer than anticipated… remember when a few patent filings and some hirings got everyone excited that Apple was on the verge of releasing an Apple Car or Apple Goggles starting five or six years ago?
Apple is a massive beast, with almost 150,000 employees and a constant push to improve and expand their offerings — which sometimes means great breakthroughs, and often means wasted R&D spending on stuff that doesn’t fly.
Blanco throws in a couple quotes from other sources who read that Bloomberg article and then ran with it with some additional excitement…
“Apple may be low keying this invention but it packs quite the punch if you logically extend what it could mean for future services”
That seems to be from the Patently Apple post, “Apple’s Satellite Phone Patent Could Technically Apply to TV,” from February 28, 2013
“One could only imagine the harmful effect on carriers of millions of future iPhone users ditching their wireless service in favor of an Apple satellite-based broadband alternative– something akin to the effects of cord cutting on cable TV companies” – Tvtechnology.com
That’s a quote from the blog post, “Will Apple Upset the Applecart With Satellite Broadband?”
If you’d like to read up further, Blanco also quotes a Popular Science article from February 2, “Everything You Need to Know About Apple’s Secret Satellite Project,” which is also just basically riffing on the “what if this thing Bloomberg says Apple is doing turns into something real” idea.
And he quotes the Times Now News blog as well, which essentially does the same thing in “what-if’ing” based on the Bloomberg story.
And the imminent nature of it all?
Here’s Blanco’s bit on that:
“Mark your calendar for June 22.
“That’s when I believe Apple CEO Tim Cook will take the stage at an upcoming Apple event…
“And announce the rollout of ‘Apple-Fi’ to the world.
“This June 22 event, known as WWDC, or Worldwide Developers Conference, is an annual event Apple has held for the past 31 years now…”
OK, that’s almost certainly NOT going to happen… if Tim Cook talks about satellite connections for iPhones (beyond GPS signals) three weeks from today, I’ll eat my hat.
Yes, Apple will be hosting the Worldwide Developers Conference starting on June 22, though it will be virtual this time — and sometimes that event leads to some meaningful new product and feature introductions, though it’s generally focused on software and new tools for app developers.
And yes, it may well be that Apple is developing satellite-based technologies and hoping to build or brand its own wireless networks that either use direct satellite links or some satellite backhaul… eventually. But its still pretty early days for the space-based communications revolution that has been predicted for the past decade, and I have no idea how it will all shake out as the billionaires turn to the final playing field and fight over space — everyone’s spending, from Bezos and Musk to Apple and Google, but nobody’s quite sure how “Space-based internet” will work out… or when. SpaceX and its Starlink satellite constellation appear to be in the lead so far when it comes to getting hardware up into space, but there are dozens of other companies involved as well, and you’re not going to be able to cancel your Verizon contract and get a direct data link from Space to your iPhone anytime soon.
But anyway, all that was Blanco’s lead-in — he didn’t even get to an investment idea yet, and he is not just saying “buy Apple” … so what’s the investment idea? More from the ad:
“You can certainly go out and buy shares of Apple…
“And when ‘Apple-Fi’ is revealed to the world as early as June 22, you’ll do very well.
“After all, ‘Apple-Fi’ could boost Apple’s business by hundreds of billions of dollars…
“Redirecting the revenue of Verizon, AT&T, Sprint, and more all back into their pockets.
“But keep in mind…
“Apple’s stock is already around $300 a share…
“Added up the company is already a $1.2 trillion company — just to double their stock price, Apple would have to go up another $1.2 trillion…
“Could that happen with the introduction of ‘Apple-Fi?’
“Sure… but it will likely take years to happen.”
So OK, Apple is fine… but where are those mega-riches we dream about?
“I’ve identified a handful of tiny companies that I believe will be key partners to Apple in launching ‘Apple-Fi’.
“If I’m right, these are small companies that could explode by billions of dollars — just like Skyworks — and make fast movers rich.”
That’s a nod to Skyworks Solutions (SWKS), which became one of the higher-profile Apple supplier stocks a few years back when it was designed in to the first 4G iPhones and saw revenue surge with iPhone orders rising. And we see such stories all the time, Apple’s tight secrecy policies have meant that some of the most popular teaser ads of the past 20 years have been of the “what’s gonna be in the new iPod/iPhone” variety, leading to the booming business in “teardowns” where a few tech websites buy up the first iPhones and take them apart, publicizing the chips and parts they find, to the delight of investors in those parts makers (or the despair of those left out of the design).
But anyway, what are those stocks? Are we ever going to get those freakin’ clues?
“As mentioned, in the race to deploy ‘Apple-Fi,’ Apple may launch between 1,400 and 3,000 satellites into space.
“And for one tiny company based in California, these plans will be a bonanza.
“You see, this little $3 billion company is the leading provider of rocket engines in America.
“NASA, Boeing… many big players rely on engines made by this company.
“And I’m confident that Apple will too.
“Because as Apple moves to launch hundreds, or even thousands of satellites into orbit…
“They’ll require billions of dollars’ worth of rocket engines to do so.
“After all… a single engine can cost well over an estimated $2 million.
“And this is the one company that can supply these engines.”
Then we get some numbers…
“If Apple launches just 2,000 satellites — they’ll need 2,000 rockets and 2,000 rocket engines.
“And if they partner with this tiny firm to provide them, at a price of $2 million per engine… that’s up to an extra $4 billion.
“If they launch 3,000?
“This little company’s revenue could explode by a massive $6 billion.”
So what’s the stock? That’s Aerojet Rocketdyne (AJRD), which is indeed the leading rocket engine maker in the country and supplies many of the big aerospace and defense companies (though they’re not the only one… SpaceX developed and uses its own engines, for example, and some lower-profile startups, like Bezos’ Blue Origin, are similarly working on different engine designs).
I’ve considered Aerojet several times over the years but haven’t actually bought shares, more’s the pity, and it has been doing well on the surging interest in space and defense stocks. It’s not exactly a “growth” stock, their revenue has been pretty steady at about $2 billion a year for a couple years now, and analysts expect that to grow by only a couple percent a year… and earnings are likely to rise by 25-30% over the next two or three years, which is pretty good but also arguably “priced in” at 23X their forecasted 2022 earnings.
On the plus side, the business is quite steady and there are some huge long-term projects, like retrofitting the ICBM fleet, that should keep Aerojet busy for a long time… and it is probably the cheapest “space” stock around if you’re going by current earnings. The big driver will be NASA and defense department spending and which contracts AJRD wins, not any hypothetical fleet of new satellites from Apple — but even if Apple did decide to join the multi-company race for low earth orbit (LEO) satellites to compete with Starlink and Amazon and OneWeb and whoever else, I should note that they wouldn’t require a $2 million rocket engine for each satellite.
I have no idea what the launch costs are for these kinds of satellites, but they’re very small compared to the multi-ton “old school” satellites that come first to mind when we imagine a satellite launch — SpaceX has been putting 60 Starlink satellites into orbit with each Falcon9 launch this year, for example, and that supposedly costs about $50 million per launch. SpaceX is a lot cheaper than many of the traditional NASA rocket launch platforms, which is why they’re getting so much attention and business, so I don’t know what that means for Aerojet — but I did read an interesting posting from Ars Technica about the crazy money being thrown at some of the high-end rocket engines they build. When it comes to space, it all sounds like play money anyway — if any of these projects are going to make economic sense on their own, without NASA funding, it will be a long way off in the future.
So sure, Aerojet is one of the clearer “pure play” space stocks, since it supplies many space programs. And it’s arguably reasonably valued and may benefit if the space launch schedule picks up dramatically from here as more satellites are planned, but I wouldn’t expect an “Apple-Fi” windfall — if you’re buying AJRD, you’ll probably do best if you pay more attention to Defense Department missile programs and NASA funding than you do to the satellite dreams of the billionaires.
And what else is Blanco throwing our way?
“At just $500 million and 21 employees, this next company is small — ultra-small.
“In other words, it can be more risky…
“Tiny stocks like this are incredibly fast-moving can be volatile…
“Share prices can swing violently in either direction…
“Because of that, you should never invest more than you can afford to lose.”
I’m always glad to see editors include that kind of language in their pitches, even though they always include it next words along the lines of “you could strike it rich.”
So what’s this second one?
“I believe this ultra-tiny company is on the cusp of a major, multi-billion dollar contract from Apple….
“You see, after launching up to 3,000 satellites, Apple will need to allocate billions of dollars annually to maintain this network of satellites.
“This includes doing things like swapping out satellites when they break and ensuring service isn’t interrupted, for example.
“And this company is uniquely positioned to help them do that.
“With years of experience in this field, this little company is a leader in deploying and maintaining an extensive network of satellites.
“No other company in the world can do what they do — and I believe they’ll be a key partner in ‘Apple-Fi’.”
There are a long list of satellite-related companies that could theoretically be partial matches for that, though most are too large and have both revenue and market caps well above $500 million, like ViaSat (VSAT), Intelsat (INTEQ, just filed for bankruptcy), EchoStar (SATS), or well below like OrbComm (ORBC).
Among the more reasonable matches, Iridium (IRDM) could fit with $500 million as a revenue number, and Globalstar (GSAT) already offers a satellite communications network and has a $500 million market cap… but both have way too many employees. As do Comtech (CMTL) and Gilat (GILT), which together will be a force for satellite ground station equipment.
So although it’s not entirely satisfying, I’m left with the best match being Loral Space and Communications (LORL), which has a near-$500 million market cap and only 21 employees… though that’s because Loral is not really a satellite operations company, it’s an investment firm with a few headquarters employees but a business that is essentially entirely made up of interests in two satellite firms, the Canadian firm Telesat (they own 62.7%) and Spanish X-band government service provider XTAR (56%).
Which makes this all a bit of a stretch, but Telesat does do some satellite management for third parties… so I suppose it’s possible they might contract out to manage someone else’s constellation. If you’re talking about a new LEO constellation of thousands of new satellites run by or funded by a big player like Apple (or Amazon, or SpaceX), however, that seems pretty unlikely to me. Still, it’s the best match I’ve run across… so take it as you like. Telesat is also yet another of the firms launching its own “state of the art” LEO constellation, they launched their first satellites in 2018 and say they are “moving forward aggressively to begin service in 2022,” so I guess that’s also a potential partner if Apple or anyone else wants to “buy in” to a constellation that’s already being built.
And Blanco also throws a few other hints on the table for other potential stocks in the sector…
“… the company that could be responsible for helping Apple transmit Wi-Fi from their satellites in space directly to your device. Since DISH spun this company off in 2009, shares have already soared as high as 200%… but this is only the beginning. I predict this company could become a key partner to Apple in the coming months… and could be rewarded with billions of dollars in extra profits. Even a tiny stake today could hand you a fortune…”
That’s EchoStar (SATS), which provides satellite services for DISH network and also owns hte Hughes broadband satellite business, providing broadband access that can be appealing to those who don’t have a terrestrial alternative (like cable or fiber). It’s a pretty unique company, with the most established satellite broadband business, but I imagine they’re much more likely to be disrupted by any potential LEO network than to profit from it — though they were also a big OneWeb investor and a a OneWeb partner, so maybe the idea is that they could transfer some of that work (reselling plans and building ground stations, mostly) to one of the other LEO constellation operators. I kind of shrug my shoulders at that, they might make it through the OneWeb bankruptcy OK but it’s hard to see SATS having a big growth spurt anytime soon.
“Up next, you’ll find the company that was just named as one of the best stocks to buy in 2020 by Yahoo! Finance. And I’m not surprised… they’ve already entered into talks about a partnership with Apple to assist in ‘Apple-Fi’. And as ‘Apple-Fi’ is announced to the world and rolled out, this company could be one of the biggest winners….”
That one I don’t know. You can come up with a few hundred stocks that are probably on one list or another that sounds like, “Yahoo Finance Best Buy in 2020!” I’ll throw out a wild guess, Boeing (BA), just because they were rumored to be working with Apple on satellite ideas back in 2017. I have no idea whether that’s really one of Blanco’s picks but certainly Boeing is a big space player… and, of course, a company carrying a huge amount of baggage at the moment thanks to their stalled 737-MAX program and the massive wave of order cancellations from cash-strapped airlines during the coronavirus travel shutdown.
“This next company you’ll find is incredible… founded by a brilliant billionaire, it’s one of the leading space companies in the world. Shares are already up nearly 400% since December… but if you move fast, you can still get in dirt-cheap… before a potential partnership with Apple pushes this stock to the moon…”
I’d guess that the December mention means we’re talking here about Virgin Galactic (SPCE), which is Richard Branson’s space tourism company and has been a great story for investor since going public through a SPAC merger back in October. It was up 400% from the December lows as of February, but came down pretty sharply from that high and is now around $17… still a fascinating story as they try to become the first to offer regular space tourism, and to expand on that with other services out of their New Mexico Spaceport location, but I expect it will remain much more of a tourism play than a satellite play — they did attempt their first test of their satellite launch project, called Virgin Orbit, and that failed last week. The big claim there is that launches can be quicker and cheaper because they launch from the air, the rockets are first ferried to cruising altitude by a giant plane, then dropped from the plane and ignited. Maybe the next test will work better.
“Your profit potential with this next company is staggering. This tiny company is one of the top satellite manufacturers in America. With revenues of just $700,000, it’s earnings could easily rocket 10-fold, 20-fold, or higher if they land a major contract from Apple as I expect. The sky’s the limit for folks who get in now…”
There are a bunch of small satellite manufacturers that have some US connection, including Sierra Nevada Corporation, Tyvak, AST, RUAG’s US operations, Planet, Spire, Blue Canyon, Swarm, the OneWeb factory in Florida, but I didn’t run across one that was publicly traded as an independent company (most small players over the years have been bought up by the huge aerospace and defense firms), or that reported such a small revenue number last year. If you’ve got a guess, feel free to toss it on the pile with a comment below.
And one final hinted-at pick:
“Finally, you’ll also find an off-the-radar space manufacturing company from Colorado. I expect it could lock in a major contract with Apple… that could send shares exploding 10x higher or more when the news is announced.”
That’s again a pretty light clue, but I’ll guess that he’s teasing Maxar (MAXR), which is a small space conglomerate built largely around space imaging systems (like spy satellites and GeoEye), but they do also own SSL, which supplies one of the longstanding platforms for GEO satellites (the SSL1300) and is also offering the smaller SSL100 and SSL500 platforms for LEO constellations.
And I’ve definitely been staring at the screen for far too long on this one, so I’ll just leave it there for you — the pitch is built around an absurd premise (“Apple-Fi” being announced in three weeks), but certainly space is a hot topic for investors now with the SpaceX astronaut flight over the weekend and the steady drumbeat of attention for all the billionaire-funded space dreams that might come to commercial fruition, so perhaps some of these companies will do well as the interest (and government funding) for space work rise. I don’t own any of these, but a few remain interesting to me (SPCE, MAXR, AJRD and CMTL would be at the top of my list to research further today, and I did enjoy booking a nice profit from SPCE earlier in the year), and it’s always fun to think about investing in something as cool as a rocket or a satellite launch.
But it’s your money at risk here, not mine, so you get to make the call — ready to buy into any of these ideas, “Apple-Fi” silliness or no? Have a favorite, or one we should definitely avoid… or maybe one that I missed? Let us know with a comment below, and thanks for reading!
P.S. If you’ve ever tried a subscription to Blanco’s entry-level Technology Profits Confidential newsletter, our readers want to know what you thought — just click here to share your experience with your fellow investors. Thanks!
Disclosure: Of the companies mentioned above I own shares of and/or call options on Amazon, Apple, and Google parent Alphabet. I will not trade in any covered stock for at least three days, per Stock Gumshoe’s trading rules.