What Industry Will Apple Crush Next?

When Apple (NASDAQ: AAPL ) enters your market, be concerned. The company has
transformed industries like music, mobile phones and digital photography. Just
look at how a phone with a decent camera has made Kodak (NYSE: EK ) and others
become irrelevant. Tuesdays announcement of the iPhone 4s was fairly
underwhelming, but it included news that might make life tough for some
companies. Apple has a new app called "Cards," which allows you to take
pictures, turn them into postcards, then submit them to Apple for printing and
sending. Each domestic card will cost $2.99, and foreign cards will cost $4.99.
Pretty cool. But this technology stands to put some pressure on a variety of
players in the space. On Tuesdays news, shares of American Greetings (NYSE: AM )
dropped by about 6.5%, and Shutterfly's (NASDAQ: SFLY ) stock dipped by as
much as 17%. So might these companies be cannon fodder for Apple? In reality,
it's not likely. Even though the greeting card market is large, it probably is
not a high priority for Apple. If anything, it is just another piece of
ancillary revenue. So why not take some of it? American Greetings and Shutterfly
have the advantage of being highly focused on their core market. It means they
can leverage their brand as well as their distribution footprint. In the case of
Shutterfly, it has partnerships with big names like Target (NYSE: TGT ), Sony
(NYSE: SNE ) and Adobe (NASDAQ: ADBE ). Moreover, the company has a substantial
user base as well as an extensive catalog of designs. So should investors see
this as an opportunity to buy Shutterfly or American Greetings on the weakness?
Probably not for American Greetings, which remains a primarily brick-and-mortar
operator thus, its growth ramp has been sluggish. Shutterfly, however, does not
have this problem. Consider that the company posted a 62% ramp in revenue during
the latest quarter. Unfortunately, the valuation remains fairly robust, at 75
times earnings. As seen with other high-fliers like OpenTable (NASDAQ: OPEN )
or even Netflix (NASDAQ: NFLX ) it can be dangerous to play these kinds of
stocks. So it probably is better to wait for a much more material drop in the
stock price before jumping in. Tom Taulli is the author of "All About Short
Selling" and "All About Commodities." You can also find him at Twitter
account @ttaulli. He does not own a position in any of the stocks named here.