After a somewhat turbulent but ultimately successful year for Apple, what sort of impact will the forthcoming iPhone 6 have on the company’s stock price?
The year began disappointingly for Apple Inc. NASDAQ:AAPL when poor sales figures reported to the city resulted in its stock price dropping sharply. At that time, Apple was forced into a damage limitation strategy, with senior figures at the corporation indicating to the media that Apple had several new product lines up its sleeve for the remainder of 2014 and 2015.
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These new products are yet to be forthcoming, but not only are they now on the horizon, but Apple has also managed to turn its share price around. After record sales in its last quarter of reporting, Apple’s share price has recovered encouragingly, and is now even threatening to push to record highs.
Currently, the Apple stock is trading around only 8 percent lower than its all-time highs of 2012. This is an extremely healthy position for the company to be in ahead of what promises to be two huge product releases in the remainder of 2014. Not only will the iPhone 6, or at least one model of it, hit the stores in the next couple of months, but the long awaited smartwatch the Apple iWatch is also likely to be released in due course.
Additionally, the iPhone 6 is being released in two separate models (at least), with a premium version of the smartphone considered to be Apple’s first phablet. Effectively, the corporation can look forward to initiating two new product lines within the next few months, and the huge prospect of a new standard iPhone hitting the market is another mouthwatering prospect for the company.
So there is seemingly plenty of potential for Apple to increase both its sales and revenue, And one would imagine that this could be reflected very favourably in terms of share price increases. But is the outlook really as rosy for them as it might appear?
Although Apple has created search a stronger branding for itself that authoritative surveys such as the annual Interbrand report have considered the company to be the world’s most distinctive brand, Apple operates in a highly competitive, consumer-driven environment. Samsung in particular is always looking to take a bite out of Apple, and has indicated that it intends to replace the consumer electronics giant as the biggest manufacturer and seller of mobile devices in the next twelve months.
Thus, it is always worth considering that no matter how well the new Apple devices are received critically, and also by the public, there will be stiff competition for them within each specific marketplace. And in order for Apple to significantly improve it share price, the company would need to strongly increase its twelve-month revenue. This currently stands at around $36 billion, so the iPhone 6 and iWatch would need to push revenue above $50 billion to see any sort of meaningful increase in share price.
Another driver of Apple stock going forward will be the iPad. While the success of the iPad has been little short of tremendous, and the Apple tablet continues to define that particular niche, recent sales have not been so encouraging. IPad sales fell by nearly 10 percent during the last quarter alone, and it has been suggested that the public appetite for updated versions of the nonetheless hugely popular tablet is waning.
Although disappointing iPad sales have yet to seriously impact on Apple’s share price, the company would be looking for increased sales of tablets in the future if they are to achieve increased revenue growth. However, it seems extremely unlikely at the moment, and even flatlining sales may prove problematical.
High margin iPhone
But sales of the iPad will be but one small factor in the future of Apple. Traditionally, the iPhone in particular is a much higher-margin, higher-volume, and higher-average selling price market for Apple than the iPad, and it is reasonable to assume that this would also apply to the long rumored iWatch. Thus, the impact that the iPhone 6 has will probably be the defining factor for the share price of Apple in the short to medium-term.
With this in mind, the critical issue may be whether Apple can live up to the hype that will undoubtedly surround the release of the iPhone 6. Recent indications are that the smartphone-sized version of the device will outperform its most obvious Samsung rival, and murmurings from the Apple supply chain that the device will be a virtual reboot of the iPhone 6 design are promising.
So if Apple can deliver on its promises, and the anticipation of the Apple fan community, then it could deliver a pretty significant share price increase in the near future. Smashing through its all-time share price record seems permanently achievable.