AAPL Dragged Down by the Weight of the World
Though Apple's new iPhone 4 earned the company a phenomenal amount of press this week, it wasn't enough to completely offset the droop AAPL shares have seen over the past few days due to general market woes. Perhaps the iPhone 4 would have packed a bit more Wall Street wallop if details on the phone hadn't already been leaked months ago.
06/09/10 5:00 AM PT
Apple shares were trading at US$245.83 at one point on Tuesday, down $5.10 (2.03 percent) from Monday's close. However, they recovered to close at $249.33, down $1.61.
Still, that's the third business day in a row, including Friday, that they've been trimmed. It's all the more surprising because Apple announced the new iPhone 4 and iOS 4 Monday in a blaze of media coverage.
Perhaps the fall in Apple's share prices understandable -- the stock market in general is shaky, companies aren't hiring and Europe's debt crisis continues to send less-than-delectable frissons down investors' spines. Can Cupertino's stock prices minimize their slide, or will they continue to echo the overall market's woes?
Follow Me Where I Go
The stock market has been taking a hammering since late last week, and on Tuesday, tech stocks remained weak, although the Dow and S&P indexes rose a little.
Meanwhile, Federal Reserve chairman Ben Bernanke has warned that economic growth will remain anemic and jobs will be scarce. Add to this concerns over the sovereign debt crisis in Europe, fears that we're entering a bear market, and gold's hitting a record price of $1,250 per ounce Tuesday (a sign that confidence in the market is waning), and it increasingly looks as if holders of Apple's stock may have cause for concern.
Why didn't the unveiling of the iPhone 4 and other announcements by Apple prevent the company's stocks from slipping along with the market at large?
Perhaps that's because so much information about Apple's new products had already leaked onto the Web.
"While we were thoroughly impressed with [Apple CEO Steve Jobs'] presentation and the products and services he introduced to the market, there were no material surprises around,, in our view," Brian Marshall, an analyst at Broadpoint Amtech, wrote to investors. "Obviously this was due in part to high-profile leaks of the iPhone 4 as well as previously discussed information such as iPad unit sales and iAds."
Nonetheless, Apple's prospects appear to remain strong, at least for the foreseeable future.
The introduction of the iPhone 4 and iOS 4, the newest version of the iPhone's operating system, injected analysts with enthusiasm.
"We walked away even more confident with our iPhone estimates of 8.8 million sold in June, 40 million for calendar year 2010, and 50 million for calendar year 2011," Broadpoint Amtech's Marshall wrote.
The gross margins on the iPhone 4 may exceed those on the iPhone 3GS, he added.
After the iPhone 4 launch, Barclays Capital's Ben Reitzes told investors that his estimates for the fiscal third quarter are likely to be conservative. He pegs iPhone sales for the quarter at 8.1 million units.
Most importantly, perhaps, in light of Apple's pushing strongly into international markets, the iPhone 4 will be a world phone. The iPhone 4 supports UMTS I, II, V, VI, and VIII.
"The UMTS Band VI, with a frequency of 800 MHz, is used widely in Asia and, as a result, the iPhone 4 should have better coverage, and therefore sell better, in some Asian markets such as Japan and New Zealand," pointed out Carl Howe, director of anywhere research at the Yankee Group.
"Further, several European markets will come onto this 800 MHz band as they decommission analog networks over the next few years," Howe told MacNewsWorld. "So, bottom line, the iPhone 4 is only the second true pentaband world phone made, after the Nokia N8.
International sales accounted for 58 percent of Apple's record-setting second-quarter results. Analysts expect they will make up even more of Apple's sales over the next few months.
Fighting Off the Challengers
Meanwhile, Android phones are gaining market share. A Nielsen report on the smartphone market released Friday showed that the iPhone had 28 percent of that market in the first quarter of 2010, making it second to the BlackBerry, which had 35 percent.
Android smartphones came in fourth with 9 percent, but both the iPhone and Android devices added two percent market share each year over year, while both Windows Mobile and BlackBerry lost two percent each.
Further, the HTC Evo Android smartphone, which Sprint launched Friday, has been sold out, and demand for Motorola's Droid smartphone remains very strong.
Not to worry, contended Francis Sideco, a principal analyst at iSuppli.
"You start all these things Apple's doing with iBooks and Netflix on the iPhone, and you're wondering whether it's got another leap there," he told MacNewsWorld.
Apple's other major mobile product, the iPad, is selling well, but several competitors have shown off their own tablet PCs running Windows 7 or Android. More are expected around the holiday season, and Hewlett-Packard will unveil one running the webOS that the vendor picked up when it agreed to purchase Palm recently.
"The question is, will Apple dominate the tablet field like it did with the MP3 player and the smartphone?" Andrew Eisner, director of community and content at Retrevo, told MacNewsWorld. "It looks good for that. It's all about apps, and whoever's got the most apps wins."
Indeed, on Monday, Apple chairman and CEO Steve Jobs said there are now more than 8,500 apps built specifically for the iPad and more than 225,000 apps in total available on the iTunes App Store. Cupertino has paid out $1 billion to developers who create apps for the iTunes store, a statistic that may lure even more developers to create apps for Apple products.
Apple Stats to Gladden the Heart
With the rebound in Apple's prices by closing time Tuesday, it appears that investors came around to analysts' views on Apple. Some reasons that possibly fueled the change of heart follow.
Apple is pushing the iPhone 4 aggressively, especially into foreign markets. It's accepting pre-orders as early as June 15 and putting the iPhone 4 on sale in five countries June 24. In July, it will add another 18 countries, in August it will add 24 countries and by the end of the year, the iPhone 4 will be available in 88 countries.
Advertisers are flocking to Apple's iAds mobile ad platform. In the eight weeks Cupertino has been selling iAds space, it has landed some of the largest enterprises in the country to commit to placing a total of $60 million worth of ads for the second half of the year. The entire mobile ads market in the United States is worth $250 million a year, Jobs said.
Investors should keep their eyes peeled for any further drops in Apple stock prices. Though they're sailing well above where they were a year ago, we may look back to this day and regard "APPL:$249.33" as a discount.