Apple Inc. (AAPL) Stock Up After China Mobile News, Analysts Doubtful

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Apple Inc. (AAPL) Stock Up After China Mobile News, Analysts Doubtful
ElisaRiva / Pixabay

Apple Inc. (NASDAQ:AAPL) stock surged 3.4% after the confirmation of the deal with China Mobile Ltd. (NYSE:CHL) (HKG:941), but according to analysts the upside for the stock may be short-lived, says a report from CNBC by Matt Clinch. In the pre-market trade, Apple shares were up over 4%.

However, investors welcomed  Apple’s announcement of plans to launch the iPhone across greater China next month.

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Investors happy with the deal

Shares surged in after-hours trade, and on the German DAX the stock rose with the start of the trading session on Monday. A number of companies that supply components to Apple Inc. (NASDAQ:AAPL) also saw an increase in their stock prices. ARM Holdings saw an increase of 2.62%, while German-based company Dialog increased by 3.5%.  At present, Apple shares are down by 1.27% for the month, after increasing around 15% during October and November.

Shares of China Mobile Ltd. (NYSE:CHL) (HKG:941) were up by almost 1% after release of the news. According to the rating agency Moody’s, the deal was “credit positive” for the mobile telecom group, which claims to be the world’s largest mobile company with a subscriber base of 750 million subscribers.

Apple Inc. (NASDAQ:AAPL) unveiled the new iPhone 5S and low priced iPhone 5C in September.  In Japan, the iPhone was available for sale on NTTDoCoMo. According to Kantar World Panel ComTech, Apple garnered 76.1% market share during October, in Japan. In its fourth quarter results (a month after the launch), the company noted that revenue in the country increased 41% compared to the corresponding period of the last year. In Greater China, sales surged 6% in the same quarter.

Deal may not benefit Apple much

David Stephenson, head of product and business development at baring Asset Management noted that there are less possibilities of sales increase, in the short term, and that Apple Inc. (NASDAQ:AAPL) in China is still a medium to long term play.

“The bulk of the population will not be buying Apple right now,” he said. It’s still an “aspirational spend” for many on the country, he said. Also, Stephenson added that China will eventually come to terms with issues like low wages and wealth disparity, which will ensure profitability for global brands such as Apple Inc. (NASDAQ:AAPL).

In Japan, stiff competition between operators means that the iPhone is being given away free with two year contracts, and in the U.K subsidies from carriers mean that the iPhone 5S can be had for free with a two year deal, which is priced at £888. In the U.S., models are sold for $200 with a similar length contract.

In China, pricing is still to be revealed, but analysts remain concerned that with the lack of carrier subsidies, the China Mobile Ltd. (NYSE:CHL) (HKG:941) deal may not have much of an immediate impact on sales.

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Aman is MBA (Finance) with an experience on both Marketing and Finance side. He has worked as a Risk Analyst for AIR Worldwide, and is currently leading VeRa FinServ, a Financial Research firm. Favorite pastimes include watching science fiction movies, reviewing tech gadgets, playing PC games and cricket. - Email him at amanjain@wordpress-785388-2679526.cloudwaysapps.com
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5 COMMENTS

  1. Chinese love American brands and respect the United States freedom apple represents. Not to mention ease of use and recurring revenue. “BUY”

  2. People, what you need to learn from this deal are two main things. 1) The deal has now taken place meaning Apple have a footing with the largest mobile network in china. (2) iPhones despite their hefty price tag are a product that are desirable more so that other mobile phones in China. Price will be a major factor in numbers rushing out to get this product but watch what happens over time, two things the Chinese love, gambling and status symbols, the iPhone will be a major symbol of status.

  3. You live in dreamland if you think that 10% of current subscribers are just going to suddenly drop who they currently use and purchase an iPhone. According to Wikipedia, 10% of the population live below the poverty line and earn less than $1 PER DAY. In terms of GDP worldwide it’s 92nd. We aren’t dealing with an affluent country here you know. The majority of people in countries a lot more affluent than China choose cheaper phones – what makes you think 75,000,000 poor people in China aren’t going to do the same?

  4. ““The bulk of the population will not be buying Apple right now,” he said.”

    750,000,000!

    If AAPL only sells to 10% it’s 75,000,000 iPhones they couldn’t sell yesterday!

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