Apple Storms China – 2 Million iPhone 5

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

In a press release early today, Apple (NASDAQ: AAPL) announced that it sold over 2 million iPhone 5 units in its first weekend of availability.

  • “Customer response to iPhone 5 in China has been incredible, setting a new record with the best first weekend sales ever in China,” said Tim Cook, Apple’s CEO. “China is a very important market for us and customers there cannot wait to get their hands on Apple products.”

When the iPhone 5 was released on Sept. 21, it sold over 5 million units in 9 countries.

Competition

Apple’s iconic iPhones are under great pressure by smartphones from Samsung running the Android operating system from Google (NASDAQ: GOOG). More recently, Nokia (NYSE: NOK) has made a strong entry with its Lumia series, which runs on Microsoft’s (NASDAQ: MSFT) new Windows Mobile 8. Finally, in January, Research in Motion (NASDAQ: BBRY) is set to release its BB10-based smartphones. As the field opens with new options, it will be interesting to see how things turn out.

 

Apple’s stock price has been battered lately by a combination of factors:

  1. Price reductions by analysts who speculate that Apple’s growth rate is slowing,
  2. Rumors of supply constraints due to various production issues,
  3. The pressure of sales by those trying to take profits in advance of the probable rise of capital gains tax rates next year.

The stock has fallen about 28% from its September high of $705, pressuring $500 last Friday.

Most recently, UBS cut Apple to $700 and reduced sales estimates. Additionally, author Steve Milunovich says that he does not expect the iPhone 5 to do as well in China as its predecessor, the iPhone 4S. If this start is any indication, then both sources are already being proven false.

Conclusion

This news will likely put a temporary end to the drop, and may reaffirm support at the $500 level. Barring any other particularly bad news, I would expect a jump in price over the next few days.

However, if a major driving force is sales to avoid the added capital gains tax, then this pressure may very well continue until the end of the year. Again, if these tax sales are really the driving force of the drop, then the stock may be spring-loaded for the first of the year.

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