Most Popular
1. Banking Crisis is Stocks Bull Market Buying Opportunity - Nadeem_Walayat
2.The Crypto Signal for the Precious Metals Market - P_Radomski_CFA
3. One Possible Outcome to a New World Order - Raymond_Matison
4.Nvidia Blow Off Top - Flying High like the Phoenix too Close to the Sun - Nadeem_Walayat
5. Apple AAPL Stock Trend and Earnings Analysis - Nadeem_Walayat
6.AI, Stocks, and Gold Stocks – Connected After All - P_Radomski_CFA
7.Stock Market CHEAT SHEET - - Nadeem_Walayat
8.US Debt Ceiling Crisis Smoke and Mirrors Circus - Nadeem_Walayat
9.Silver Price May Explode - Avi_Gilburt
10.More US Banks Could Collapse -- A Lot More- EWI
Last 7 days
Stock Market Volatility (VIX) - 25th Mar 24
Stock Market Investor Sentiment - 25th Mar 24
The Federal Reserve Didn't Do Anything But It Had Plenty to Say - 25th Mar 24
Stock Market Breadth - 24th Mar 24
Stock Market Margin Debt Indicator - 24th Mar 24
It’s Easy to Scream Stocks Bubble! - 24th Mar 24
Stocks: What to Make of All This Insider Selling- 24th Mar 24
Money Supply Continues To Fall, Economy Worsens – Investors Don’t Care - 24th Mar 24
Get an Edge in the Crypto Market with Order Flow - 24th Mar 24
US Presidential Election Cycle and Recessions - 18th Mar 24
US Recession Already Happened in 2022! - 18th Mar 24
AI can now remember everything you say - 18th Mar 24
Bitcoin Crypto Mania 2024 - MicroStrategy MSTR Blow off Top! - 14th Mar 24
Bitcoin Gravy Train Trend Forecast 2024 - 11th Mar 24
Gold and the Long-Term Inflation Cycle - 11th Mar 24
Fed’s Next Intertest Rate Move might not align with popular consensus - 11th Mar 24
Two Reasons The Fed Manipulates Interest Rates - 11th Mar 24
US Dollar Trend 2024 - 9th Mar 2024
The Bond Trade and Interest Rates - 9th Mar 2024
Investors Don’t Believe the Gold Rally, Still Prefer General Stocks - 9th Mar 2024
Paper Gold Vs. Real Gold: It's Important to Know the Difference - 9th Mar 2024
Stocks: What This "Record Extreme" Indicator May Be Signaling - 9th Mar 2024
My 3 Favorite Trade Setups - Elliott Wave Course - 9th Mar 2024
Bitcoin Crypto Bubble Mania! - 4th Mar 2024
US Interest Rates - When WIll the Fed Pivot - 1st Mar 2024
S&P Stock Market Real Earnings Yield - 29th Feb 2024
US Unemployment is a Fake Statistic - 29th Feb 2024
U.S. financial market’s “Weimar phase” impact to your fiat and digital assets - 29th Feb 2024
What a Breakdown in Silver Mining Stocks! What an Opportunity! - 29th Feb 2024
Why AI will Soon become SA - Synthetic Intelligence - The Machine Learning Megatrend - 29th Feb 2024
Keep Calm and Carry on Buying Quantum AI Tech Stocks - 19th Feb 24

Market Oracle FREE Newsletter

How to Protect your Wealth by Investing in AI Tech Stocks

iPhone Becomes Apple Stock's Big Vulnerability

Companies / Tech Stocks Jan 16, 2013 - 11:18 AM GMT

By: Money_Morning

Companies

David Zeiler writes: We hear one tidbit of bad news about Apple Inc. (Nasdaq: AAPL) cutting orders for iPhone 5 components and - boom! - Apple stock drops more than 6%.

The reason for the stark cause-and-effect on Apple stock is that the iPhone contributes about 53% of Apple's vast revenue. [In fact, were the iPhone a standalone company, it would rank 29th in the Fortune 500.]


This latest Apple bombshell broke late Sunday.

According to reports from Nikkei and The Wall Street Journal, Apple supposedly cut orders for several key iPhone 5 parts for the first quarter. The Cupertino, CA company's orders for iPhone 5 screens, in particular, were reportedly slashed in half.

That was immediately interpreted as a response to lower-than-anticipated iPhone 5 sales, which in turn raised alarms that Apple could be headed for more earnings disappointments, hence the selloff.

Apple followers have questioned the validity of the story. Some bloggers pointed out that the number of iPhone 5 screens that Nikkei said Apple ordered had to be false in that it was far beyond any realistic estimate of iPhone sales for the current quarter.

But whether there's anything to the report or not, its impact on Apple stock has been real.

In the immediate wake of the story, several analysts cut their ratings and price targets. In less than two trading days, AAPL has lost $30 billion of market capitalization - the equivalent of Lockheed Martin Corp.'s (NYSE: LMT) entire market cap.

Apple is now paying the price for having one of the most profitable consumer products in history.

iPhone Becomes Vulnerability for Apple Stock
On the way up, the iPhone made Apple the most valuable company on the planet.

But now that iPhone sales growth seems to be leveling off, the overdependence that such success created has become vulnerability, at least as far as Apple stock is concerned.
Make no mistake - the iPhone remains popular, but it no longer dominates the smartphone market as it did in its first several years.

According to IDC, Apple's global share of the smartphone market slipped from 23% in the last quarter of 2011 and the first quarter of 2012 to just 14.6% in the third quarter.

Meanwhile, market share for Samsung Electronics (SSNLF), Apple's chief rival in the smartphone market, has shot up from 8.8% in the third quarter of 2010 to 31.3% in the third quarter of 2012.

Research firm Strategy Analytics predicts that Samsung, which dominates the market for phones that use Google Inc.'s (Nasdaq: GOOG) Android operating system, will increase its lead over Apple by about one-third in 2013 by selling 290 million smartphones compared with Apple's 180 million.

Unless Apple has some answers up its sleeve for 2013, stagnant - or even just moderate growth in iPhone sales - will remain a drag on Apple stock.

What AAPL Might Do to Beef Up iPhone Sales
Apple is not without options regarding ways to invigorate iPhone sales. Some recent rumors and news reports point to some of these possibilities:

■The "Cheap" iPhone: Several recent reports claim Apple has been working on a low-cost version of the iPhone that would retail for $99 to $149. Some dismissed the reports after Apple marketing chief Phil Schiller said that a "cheap" iPhone would "never be the future of Apple products." The reality may be that Apple is indeed working on a phone that it can sell for less, but one that maintains minimum standards of quality. Such a "budget iPhone," which might lack a Retina display and use older camera technology to cut costs, would be affordable to millions more customers, especially those in developing countries with the fastest-growing markets like India and China.
■Quicker Product Cycles: Apple surprised observers with the iPad 4 last fall, just six months after the iPad 3 debuted. But refreshing its products twice a year, instead of just once a year, would help maintain sales throughout the year. With competitors like Samsung coming out with new products all year long, a six-month-old iPhone model looks stale by comparison, and sales numbers show at least some potential iPhone buyers have opted for newer Android models. Will Apple do it? Many suspect that Apple is indeed planning an "iPhone 5s" update for the May-June period.
■China Mobile Deal: Apple's prospects in China have been held back by lack of access to China Mobile's 700 million subscribers, the most of any carrier in the world. But that could change in 2013 as Apple CEO Tim Cook traveled to China just last week to meet with his China Mobile counterpart. Such a deal, combined with a budget iPhone offering, could spark a huge increase in iPhone sales.
■Cutting-Edge Technology: Let's face it, the overwhelming lead that the original iPhone had over the competition is mostly gone. Rival phones have caught up in most areas, and in a few surpassed the iPhone. It's hard to charge Apple's premium prices for products essentially comparable to what the other guys are selling. Apple needs a new unique killer feature for the iPhone, if not in the spring, then for the fall.

Source :http://moneymorning.com/2013/01/16/the-fiscal-cliff-deal-just-made-bonds-even-more-risky-in-2013/

Money Morning/The Money Map Report

©2013 Monument Street Publishing. All Rights Reserved. Protected by copyright laws of the United States and international treaties. Any reproduction, copying, or redistribution (electronic or otherwise, including on the world wide web), of content from this website, in whole or in part, is strictly prohibited without the express written permission of Monument Street Publishing. 105 West Monument Street, Baltimore MD 21201, Email: customerservice@moneymorning.com

Disclaimer: Nothing published by Money Morning should be considered personalized investment advice. Although our employees may answer your general customer service questions, they are not licensed under securities laws to address your particular investment situation. No communication by our employees to you should be deemed as personalized investent advice. We expressly forbid our writers from having a financial interest in any security recommended to our readers. All of our employees and agents must wait 24 hours after on-line publication, or after the mailing of printed-only publication prior to following an initial recommendation. Any investments recommended by Money Morning should be made only after consulting with your investment advisor and only after reviewing the prospectus or financial statements of the company.

Money Morning Archive

© 2005-2022 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Post Comment

Only logged in users are allowed to post comments. Register/ Log in