Apple: Dead Money Through November?

Bill is a member of The Motley Fool Blog Network -- entries represent the personal opinion of the blogger and are not formally edited.

One key to successful long-term investing is learning to manage short-term expectations. Many Apple (NASDAQ: AAPL) investors expect Apple's stock price to move up when new product(s) are announced in the fall. History however, shows it may be wise for Apple investors to temper their short-term expectations for the stock.

The market is rarely impressed with Apple's new products

Here's how the market responded to Apple's introduction of the iPhone and iPad (new product categories) and the iPad Mini (category extension).

iPhone: introduced Jan 09, 2007: An initial run-up in Apple's stock price in anticipation of the iPhone launch quickly reversed, with Apple stock trading around the prelaunch price levels through early March.

iPad: introduced Jan 27, 2010:  Apple's stock price immediately traded down with the stock reaching its low in early February (down 4%). The stock then traded in a tight range, only returning to its pre-introduction price in early March of that year.

IPad Mini: introduced Nov 02, 2012: Apple stock declined 8% following the iPad Mini's introduction (Nov 2 - Nov 15). Apple's stock then traded sideways through December then continued the stock's 2013 decline.

Market concerns over Apple's pricing, margins and competition seem to initially overwhelm any market excitement for Apple's new products or category extensions. In the case of the iPad introduction, many in the analyst and media community actually questioned whether the company's tablet was even a viable product.

What to expect: iPhone 5s and iPhone 5c

iPhone 5s

Sources of near-term price pressure: With no expected changes to the overall look of the iPhone 5s, the new smartphone risks being viewed by the market as an unimportant, incremental upgrade. Recall that while the iPhone 4s introduced an upgraded operating system and Siri, Apple's voice assistant, the iPhone 4s there were initial fears that the iPhone 4s would not be widely adopted. In addition, worries of market saturation for premium smartphones, underscored by the underwhelming sales performance of the Samsung Galaxy S4, could weigh on the iPhone 5s introduction.

Sources of near-term price catalysts: Apple's new iPhone model is expected to launch with a major upgrade to its operating system (iOS 7) and new fingerprint sensing technology. Also, AT&T, Verizon and T-Mobile have introduced 1-year upgrade programs for smartphones in the US. If the iPhone 5s' new functionality impresses, and the new upgrade programs see strong adoption rates, investors may see a positive move in Apple's stock price.

iPhone 5c

Sources of near-term price pressure:  Like the iPad Mini, the iPhone 5c is likely to be met with market concerns over margins and cannibalization of the higher-priced iPhone 5s. The lower priced iPhone, tentatively named iPhone 5c, is expected to launch in the fall of this year. With a plastic body and an older chip set, the iPhone 5c is seen as way for Apple to compete in emerging markets where lower-priced smartphones are more popular.

Sources of near-term price catalysts: Higher than expected iPhone 5c margins, or the announcement of a significant distribution deal in emerging markets (ex. China Mobile) might overcome margin and cannibalization fears.

A Quick Look at the Competition

Apple's new iPhone models are likely to place increasing distribution and pricing pressure on Microsoft (NASDAQ: MSFT)BlackBerry (NASDAQ: BBRY), and Nokia (NYSE: NOK). Apple's iPhone 5c is expected to come in multiple colors, reducing available shelf space in carrier stores for the smaller brands. In addition, a mid-priced iPhone eliminates a price niche for the smaller OEMs, pressuring them to compete in even lower-priced segments. While Samsung is unlikely to see any major impact on its smartphone sales from Apple's new iPhone models due to the company's broad product line-up across price segments.

The Foolish Bottom Line

Apple investors may hope to see Apple's languishing stock price rise with the company's fall product announcements. History, however, indicates that investors may see little movement in Apple's stock for the first few months following a product announcement. Understanding how Apple's stock responds to product announcements helps to mange investors' expectations and keeps their Foolish focus on the long-term potential of Apple's stock.

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Bill Shamblin owns shares of Apple. The Motley Fool recommends Apple. The Motley Fool owns shares of Apple and Microsoft. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. Is this post wrong? Click here. Think you can do better? Join us and write your own!

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