The Next Catalyst for Apple: Your Kids

You don't have to search long to read about many different potential catalysts that can drive Apple's (NAS: AAPL) stock back to new highs. I listed several when I first purchased Apple in my Motley Fool Rising Star Portfolio, and I went on to list three more reasons to buy Apple shortly thereafter. I spoke about things like booming international sales and Apple's growing presence in the enterprise (corporate) market. Even more recently, when I added to my Apple position, I talked about the possibility for the tech juggernaut to launch a game-changing new Apple TV as early as next year. These are all exciting opportunities for Apple and could help make Apple shareholders very happy over the next several years. But there's another catalyst for Apple that may surprise you: your children.

According to research by Nielsen, the iPad, iPod Touch, and iPhone are the three most-wanted consumer-electronic items among kids ages 6-12. Kids seem to enjoy the interactive and intuitive nature of the gadgets, and many parents are using tablets and smartphones not just as playthings for their children, but also as learning devices.

Sales to parents are boosting Apple's current revenue, but what may be even more beneficial to the company is that parents are introducing their children to Apple technology. For many kids today, an iPad will be their first experience with a computer. And since Apple's products tend to be "sticky," with high customer-satisfaction ratings and repeat purchases, it's likely that many of these children will go on to become Apple consumers as they grow older. In this sense, Apple is building future demand for its products and solidifying its customer base, not unlike what Under Armour (NYS: UA) has done by marketing its high-performance athletic apparel to young athletes, many of whom have remained fans (and customers) of the company as they reached adulthood.

Apple is, however, facing increased competition in the tablet market. (NAS: AMZN) recently introduced its Kindle Fire at a $199 price point, less than half the price of the iPad. Many parents will opt for this lower-cost tablet for use by their children, and indeed many already have: The Kindle Fire was the best-selling product across all of over the holiday weekend, and it's a popular item at retailers including Target and Best Buy.

But in addition to Apple, and regardless of whether it's Apple or Amazon that benefits most from this trend, other companies have an opportunity to capitalize on the demand for children-oriented content that can be consumed through tablets and smartphones. By selling digital apps featuring their branded characters, content producers such as Disney (NYS: DIS) and DreamWorks Animation (NAS: DWA) are enjoying a new outlet for their content. Even what were once traditional toy companies, Mattel (NAS: MAT) and Hasbro (NAS: HAS) are focusing more and more resources on digital content and licensing opportunities. Judging by Nielsen's research results, they'd be wise to continue this course of action.

It appears that our children will continue to drive the smartphone and tablet revolution forward -- a trend many investors are overlooking as well as a potential catalyst for tech titans such as Apple and Amazon. But if you're interested in hearing about three under-the-radar companies quietly cashing in on the booming smartphone and tablet markets, you can check out The Motley Fool's latest special free report: "3 Hidden Winners of the iPhone, iPad, and Android Revolution." The report is yours today,absolutely free.

At the time thisarticle was published Joe Tenebruso manages a real-moneyRising Star Portfoliofor The Motley Fool and is an analyst for the Fool's Million Dollar Portfolio and Income Investor premium services. Joe has written puts on Apple. The Motley Fool owns shares of Under Armour and Apple.Motley Fool newsletter serviceshave recommended buying shares of Apple, Walt Disney,, Mattel, Under Armour, DreamWorks Animation, and Hasbro and creating a bull call spread position in Apple. Try any of our Foolish newsletter servicesfree for 30 days. We Fools don't all hold the same opinions, but we all believe thatconsidering a diverse range of insightsmakes us better investors. The Motley Fool has adisclosure policy.

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