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Apple Inc. (AAPL): The Company Needs to Do More Than These Three Things

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Apple Inc. (NASDAQ:AAPL) has been giving bulls fits in recent months, and everyone seems to have the secret recipe of what will get the world’s most valuable consumer tech company back on track.

Apple Inc.

ISI Group analyst Brian Marshall was on CNBC, boiling down what Apple Inc. (NASDAQ:AAPL) needs to do regain its swagger to three simple points:

Apple Inc. (NASDAQ:AAPL) needs to put out a 5-inch iPhone to compete against Samsung’s Galaxy S4 and other Android handsets that make the iPhone 5 seem puny in comparison.

There has to be a low-cost iPhone so Apple Inc. (NASDAQ:AAPL) can compete in overseas markets where the company’s market share is much lower than it is here.

Apple Inc. (NASDAQ:AAPL) needs to become more aggressive in returning cash to its shareholders.

Putting three bullet points on the firing line
The latest reports out of Asian suppliers aren’t very encouraging in tackling the first point. Sources are telling The Wall Street Journal that production on the next iPhone will begin this quarter for a summertime launch, but the new device is the same size as the iPhone 5.

Marshall warns that every manufacturer outside of Apple Inc. (NASDAQ:AAPL) at the Mobile World Congress earlier this year had a 5-inch smartphone to show off. Apple may be a year away with a response if it lets this window slip away.

The low-cost iPhone is more likely to happen this year. The chatter is growing, and countries where wireless carriers aren’t willing to fork over more than $300 in subsidies need a cheaper solution badly. The big challenge for Apple is to get the balance right.

When the market wanted a cheaper iPad, the iPad Mini wound up cannibalizing sales of the larger tablet at a price point 34% lower than the full-sized iPad.

At a time when even the latest iPhone lacks features found in the latest Android devices, it’s not as if Apple can afford to scale back on the spec sheet.

As for returning more money to its shareholders, everyone outside of Cupertino is stumped why Apple hasn’t come through with a dividend increase. It has the money. It’s not spending it on acquisitions. The aggressive buybacks and dividend-hike announcement can’t come soon enough.

That might be enough to settle Apple bulls down, but is that enough? Apple could really be doing so much more.

Apple slices
Missing from Marshall’s three points is the need for innovation.

Marshall is bullish on Apple. He has a “Strong Buy” rating and a $600 price target. In order for Apple to get there it’s going to need more than a larger iPhone, a cheaper iPhone, and a fatter yield.

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