Apple Inc. (NASDAQ:AAPL) has found itself entangled within the quandary of premium pricing against a highly discounted stock price. This has mainly been brought on by the disruption caused by competing products from rival companies such as Google Inc (NASDAQ:GOOG) and Amazon.com, Inc. (NASDAQ:AMZN). Apple's products are often premium priced in relation to the market; while their rivals are encroaching the industry with more competitively priced products. In a nutshell, the likes of Amazon.com, Inc. (NASDAQ:AMZN) and Google are flooding the market with cheap products which at base value seem to somewhat meet the expectations and preferences of consumers.
Apple has sought to counter this by introducing less expensive products like the iPad mini, which is deemed to directly rival Google's Nexus 7 tablet and Amazon's Kindle Fire and Kindle Fire HD devices. Additionally, Apple's iOS, which is primarily used on Apple smart devices has been largely trumped by Google's Android O.S which is used across a variety of devices by many different companies. Furthermore, Apple's supply chain appears to be slowing in terms of producing the company's products, as depicted by recent statistics on iPhone 5 and iPad mini inventory concerns.
The company's stock hit an all time high of $705 in late September but has since fallen to trade at $509 per share as of Dec 12, the lowest price since February. Apple Inc. (NASDAQ:AAPL) stock has fallen by nearly 25 percent as per today's price of $531.28 at 1.00 p.m EST. This is a similar scenario to the one experienced by Google Inc (NASDAQ:GOOG) and Amazon.com, Inc. (NASDAQ:AMZN) at different periods in 2011.
In a report published Tuesday, Barclays PLC (LON:BARC) (NYSE:BCS) equity research analysts compared Apple's current misfortunes with the two scenarios experienced by Google and Amazon, in what they called price corrections.
Google's stock price recovered from a decline of between 20-21 percent twice in 2011, while Amazon stock has gradually recovered from the 30 percent decline experienced between October 2011 and January 2012. The big question is whether or not Apple can replicate these recoveries, which seem to be all too common in technology and web-based companies. Apple's quandary is magnified by virtue of the fact that the recovery of Google Inc (NASDAQ:GOOG) and Amazon.com, Inc. (NASDAQ:AMZN) has been fueled by their encroachment into Apple's line of business by offering less expensive products.
Android OS has largely cannibalized the iOS market share while the Nexus 7 and Kindle Fire tablets are providing consumers with a better option in terms of overall pricing. Apple has introduced iPad mini to try and compete in the low end market, but this seems to be only damaging to conventional iPad business. Apple's iPhone is also premium priced as compared to the likes of the Samsung Galaxy S3, Google's fully owned subsidiary Motorola Mobility Holdings Inc (NYSE:MMI), Razr smartphones, and Nokia Corporation (NYSE:NOK) Lumia phones among several others. Additionally, Microsoft Corporation (NASDAQ:MSFT) is also venturing into the tablets business as well.
Analysts are predicting that Apple Inc. (NASDAQ:AAPL) might be forced to introduce a cheaper iPhone for the low end market as happened with iPads. The company is also expected to introduce the iTV, a"Wall Tablet," as it seeks to boost its subscription business. It appears as though it is the proper time that the company introduced other channels of revenue generation apart from its Apple store business.
Interestingly enough, despite all of the previous challenges highlighted, Apple Inc. (NASDAQ:AAPL) stock still trades at an incredibly discounted price as compared to its competitors. The majority of analysts still rate the stock at Buy, despite reduced price targets. Therefore, Apple's price of $531 per share seems to be a result of luck and investor confidence rather than fundamentals, which means price correction could seemingly be just around the corner. However, the company will need to find something to fully restore investor confidence, which analysts believe to be the introduction of new devices.
Nonetheless, I believe investor confidence has largely been infringed upon by the encroachment of new devices into Apple's business, which are giving consumers a wide variety of choices for a lower price. It is the fear of what might happen if these products impress consumers, which seems to be affecting investor confidence. Apple may not need to introduce a new range of product lines, like Apple TV to restore confidence. Time will be a good measure though, as customers are merely testing the newly introduced devices before they approve or disapprove to acquire again in the future, but I guess few are willing to "wait and see".