Why iPhone 5 Will Propel Apple to New Heights- But Beware
Margie is a member of The Motley Fool Blog Network -- entries represent the personal opinion of the blogger and are not formally edited.
The chart of a stock, without news, is largely a graphical representation of the underlying investor psychology. This is why stocks largely go up and down together, and hence the Wall Street expression "a rising tide raises all ships."
Looking at the chart of Apple (NASDAQ: AAPL), clearly investors are bullish on the iPhone 5, and likely for good fundamental reasons, but nevertheless the stock is rising on hearsay, rumors, and speculation, not concrete information.
Now, I have several friends who are resellers for Verizon, AT&T (NYSE: T), and Sprint (NYSE: S) who have all complained to me (independently from one another,) that they are having a downturn in sales as there are a plethora of people eligible for upgrades who have specifically told them they are holding out for the iPhone 5. The fact that there is such pent up demand, is a likely indicator of lines around the block of your local Apple Store the day this technological marvel finally arrives, meaning a surge in sales that will justify the recent stock run-up.
For Sprint, this must be welcome news, as their CEO bet HUGE on selling many, many Iphones, guaranteeing Apple billions in future revenues. I'd imagine if anyone is looking forward to the iPhone's release, it will be Sprint headquarters. Similarly, the iPhone represents over 50% of smart phone sales at Verizon and AT&T, which is why there are rumors they have requested employees not take vacation the week following the iPhone's release.
Interestingly, there are rumors that AT&T has instructed store managers to steer customers away from the iPhone, because it is heavily subsidized by the company (meaning larger profits for Apple).
Now, as investors hear of long lines, as they read the glowing customer reviews that will likely take place, they might push the price of the stock up even higher, anticipating a boffo earnings report.
Apple is an innovative company that creates tangible value for the consumer and for society as a whole. I genuinely admire the fact that Steve Jobs was able to take the stock from near bankruptcy when he returned, to the most valuable company in the history of the world.
Such visionary leaders, however, are rare, and although Apple's success could not solely be attributed to Jobs, there's no doubt that he was a major component of it.
The question I ask is will such innovation and visionary products continue out of the pipeline? Right now, Apple has a halo around its head in the minds of consumers. They feverishly await each new product's release, and the company has yet to disappoint. Being first to market creates a cult and loyalty which enables Apple to sell their products for higher prices than other companies. Owning an Apple product has cache, and gives its owner a degree of importance in an egotistically driven consumer society.
I say, good for Apple. I also, as an investor have to ask, what's next? As who knows how many projects are left that Steve jobs had his fingerprints on in Apple's pipeline. Consumers might forgive one dud, maybe two, but after that the halo we see around Apple's products might not shine so brightly.
To some degree it reminds me, and bear with me, of "The Simpsons." The first six or seven years of the show, it had a cult following, and we used to make each new show, "must see TV." We used to have Simpson's parties, and talk about its genius during the week. Then Bill Oakley and Josh Weinstein, who were the show's decision makers during the excellent run, left the show.
We still tuned in to watch every Sunday, we still wanted the show to be great, it kept us together, gave us camaraderie, but slowly the laughs began to ebb, and our group began to disband. With the limited time that I have today to watch TV, I never watch the Simpsons, not when Modern Family or 30 Rock are my other choices. In fact, the few times that I have caught the show I have been severely disappointed.
You see, Steve Jobs combined art with technology, and helped create magnificent products that truly shine. But much like the Simpsons, when the genius minds behind the show disappear, the true artists, it's very common for the product itself to decline.
If so, buy Apple on the run up, and feel free to keep it long-term, but if you see a couple of bad showings, you might see that as a downward trend, and don't be afraid to hit the sell button.
margiecfl has a long position in Apple. The Motley Fool owns shares of Apple. Motley Fool newsletter services recommend Apple. 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.