To Worry or Not to Worry
Sonam is a member of The Motley Fool Blog Network -- entries represent the personal opinion of the blogger and are not formally edited.
Seems like Apple’s (NASDAQ: AAPL) recent price drop may give investors some sleepless nights.
Nomura Equity Research recently stated that the next two years don’t look too good for the company, predicting a fall in its earnings growth rate from the current 50% to as low as 10% by 2014.
Rising competition from rival companies, volatile industry wide demand, supply side problems and maturing markets in the tablet and phone sector are not helping its case.
With its next earnings date merely 7 days away, 2 days after the rumored launch of iPad Mini, what should investors expect from its fourth fiscal quarter?
Apples gone bad..
While Apple had a lot of hopes from its latest baby, iPhone 5, its stock price has a different story to tell. Initial sales of the latest model of the iPhone were disappointing, to say the least. So much so, that it won’t be surprising if December quarter sales do not reach what many are expecting-- 50 million. Not to mention its navigation software error that ignited consumer scorn.
As a result, over the past twenty days, many investors have sold off their shares in Apple, leading to the fall in its price.
Partners in Crime
Apple’s iPad 3, despite increasing competition, still commands more than two-thirds of the market share in the tablet sector. However, this could soon be ancient history. The latest news is the iPad’s latest rival, a Nexus tablet by Google (NASDAQ: GOOG) is in the pipeline. The 10.1 inch tablet will be launched in partnership with Samsung, the South Korean conglomerate. The tablet, with a 2560 by 1600 pixel display and 299 pixels per inch (PPI) density is all set to give Apple’s iPad 3 a run for its money. The iPad 3 has a lower pixel density of 264 PPI.
In a statement to CNET, Richard Shim, an NPD DisplaySearch analyst called the Nexus tablet “a high-end device”. He also added that Google also plans to launch a tablet for as low as $99.
Google has a long-standing partnership with Samsung, with them co-branding the Galaxy Nexus Samsung smartphone. Their latest deal will strengthen their relationship. Google also partners with Asus for its Nexus 7 tablet.
Thorny Way Ahead
However, all is not rosy up Google’s lane. While Google plans to have one billion Android phones in the market soon, it is not known to have made a lot of profits on tablets launched by it earlier. Its new Nexus may not be such a great money-maker after all.
Further, rumors about an antitrust case being issued against the company by the Federal Trade Commission are doing the rounds. If this goes underway, Google may have to cough up huge amounts as settlement leading to a fall in its prices.
With all this going on, Google investors may soon need to sit up and take notice.
Fire it up!
Talking about tablets, Apple also has Amazon’s (NASDAQ: AMZN) Kindle Fire to compete with. The tablet by Amazon is believed to be launched in the UK in two weeks’ time. Launched in the US last year, Amazon is believed to have revamped the model prior to its launch in the UK. With prices starting at £129 (roughly equivalent to $206), coupled with access to Amazon’s mind-boggling collection of e-books, the Kindle Fire may be a tough competitor to Apple’s latest tablet offerings.
Despite the first Kindle Fire grabbing 20% of the US market, it is believed that overall, Amazon did not make much on the tablet. However, the upgraded 4G version looks promising. With an average annual earnings growth of 25% over the past few years, Amazon looks promising!
With so many things happening, Apple investors may have a lot to worry about. However, Apple’s stronghold in the market and past history tell me not to worry.
As always, the company has come up with its way to counter the rising competition. For starters, the iPad Mini, rumored to be launched on Oct. 23, may give a much awaited push to Apple’s share price.
In a bid to rival the smaller tablets launched by the likes of Google (Nexus 7) and Amazon (Kindle Fire), the iPad Mini is rumored to be priced lower than other previously launched Apple products. The low price, however, comes at a cost. The smaller version of the iPad is rumored to solely work on Wi-Fi with no connectivity to 3G or 4G networks. Believed to be launched in the first week of November, Apple has a lot of hopes riding on this one.
Apple’s latest offering, the Retina display MacBook Pro and the speculation surrounding its much “rumored” iTV should put a smile on its investors’ faces.
Despite being down by nearly 10% from its record high of $705.07, Apple is still doing very well, as compared to the previous year.
All said and done, I believe that Apple investors have nothing to worry about. As always, Apple will bounce back!
Know What You Own
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sonamchamaria has no positions in the stocks mentioned above. The Motley Fool owns shares of Apple, Amazon.com, and Google. Motley Fool newsletter services recommend Amazon.com, Apple, and Google. 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.