Did the iPhone 5 Just Get More Attractive for Apple?
Douglas is a member of The Motley Fool Blog Network -- entries represent the personal opinion of the blogger and are not formally edited.
The recent release of the new Nokia (NYSE: NOK) Lumia 920 and Lumia 820, each of which run off the Microsoft (NASDAQ: MSFT) Windows Phone platform, does not seem to have been well received. While a bit of the buy-the-rumor-sell-the-news phenomenon is likely involved, Nokia is down over 10% on the release of its new devices. This should cause Apple (NASDAQ: AAPL) investors to heave a little sigh of relief as the company finishes its preparations for the release of the iPhone 5. While most Apple true-believers will assert that the new devices were never a real threat, the Windows Phone 8 had the potential to give consumers another legitimate alternative. While the iPhone may remain the king at the device level, Google’s (NASDAQ: GOOG) has taken over as the most popular ecosystem in the smartphone kingdom – being on top means that every competitor is chasing. While it may be a bit early to completely write off the Lumia 920 as a contender, preliminary evidence is positive for Apple.
Nokia’s New Smartphone
The Lumia 920 is meant to be Nokia and Microsoft’s top smartphone, fully equipped to compete with rivals at both Apple and Google. While the new feature list is extensive, three of the top highlighted ones include the device’s chip, its camera capability and a feature called “Nokia City Lens.” The phone will include the new Snapdragon S4 chip from Qualcomm (NASDAQ: QCOM) which will make it one of the fastest on the market and able to operate on 4G LTE networks. The camera, which includes upgraded hardware, is based on what Nokia is calling “floating lens technology.” Essentially, the phone’s software is used to provide stabilization and light recalibration so that the phone may offer a more camera-worthy experience. The Nokia City Lens gives the user the ability to point the device at a building and receive information ranging from restaurant details to additional points of interest. This information overlay is also built into the phone’s map features.
While many of these features are likely to appeal to users, none of them are likely to provide a major threat to Apple and the iPhone 5 – particularly ahead of any information on what Apple’s new creation will be capable of doing. Adding to the problems Nokia faces with the launch is the fact that Google’s Motorola Mobility division also rolled out the new Motorola Razr this week. This phone will also feature the Qualcomm Snapdragon S4, so the performance upgrades will not be exclusive to Nokia. The news is likely positive for Qualcomm, which is asserting its dominance in the U.S. market for 4G LTE enabled chips, but not for Nokia.
The Impact for Apple
While Apple shares traded down with the news, along with the broader market, the less-than-sterling release of the Nokia devices is very positive for the iPhone maker. The lack of any guidance from Nokia or Microsoft as to when the devices will be available for sale, or at what price, means that consumers will likely forget about this option until it actually hits shelves. This should clear the way for Apple to continue to roll on the momentum created, in part, by its patent victory over Samsung. The stock is trading near all-time highs, and despite its continued attractive valuation (the stock has a trailing P/E of 15.8) and growth prospects, the recent price action makes it susceptible to a correction in the near-term. The Lumia release had the potential to be the catalyst for that correction, so the less-than-warm reception received by Nokia today is bullish for Apple.
Apple stock continues to be attractively valued with the promise of good things in the long-term. With that in mind, the apparent need for some sort of correction should make new investors vigilant. To put this in perspective, from April 9 to May 17, Apple’s stock fell from $636.23 to $530.12. The correction has allowed the stock to trade even higher, so a healthy dip may be favorable as a long-term matter and give investors a more attractive entry point. On the other hand, if those events capable of triggering such a correction continue to pass silently into the background, the stock may rise, unchecked, for a bit longer. It is important to remember that no asset appreciates in a straight line forever; those who did not learn from the tech bubble or the housing bubble are destined to repeat the same mistakes. Some may time the top, but on the whole, disciplined investing is the prudent approach and the one that will work in the end. Apple continues to be a long-term buy, but short-term entries faces heightened risk.
Mr. Ehrman has no positions in the stocks mentioned above.The Motley Fool owns shares of Apple, Google, Microsoft, and Qualcomm. Motley Fool newsletter services recommend Apple, Google, and Nokia. 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.If you have questions about this post or the Fool’s blog network, click here for information.