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As We Head Into Weekend, iPhone 2.0 Is All The Focus

6 June 2008 4 Comments

It is widely anticipated that Apple’s Steve Jobs will reveal the next version of the iPhone on Monday at the WWDC. With one trading day to go until i-Day, how can investors play the Apple stock? Most people have been viewing the stock as poised to hit $200 for weeks now yet it still hasn’t happened. Let’s take a look at Apple’s stock, the upcoming iPhone, and how we believe the release to affect the stock.

The New iPhone

The reality is that the new iPhone is completely priced into the stock right now. It has been a major driver of the stock’s run over the last few months. Unless Jobs announces some unexpected and remarkable new features for the iPhone, don’t expect a bounce. In fact, anything short of a better version of the iPhone with GPS and 3G, I’d expect the stock to drop significantly.

There have been some rumors over the possibility of video conferencing functionality. If Jobs announces this functionality and demonstrates it at the conference, there is a possibility for the stock to bounce. That could be very exciting and innovative.

Other Products

Additionally, there are some rumors about Jobs potentially announcing some other new products such as a mini-laptop device. I would be surprised if this happened, but if it does, this could also provide a nice bounce for the stock.

The Stock

The bottom line is that Apple’s share price is high. Sure, they have fantastic growth and amazing products, but this is all priced into the stock. Could the stock be higher in a few years? Absolutely. However, in the short term I think we are near the top of its trading range. As an Apple believer, I would love for the stock to drop to present a nice buying opportunity because at current prices, I don’t think its the best time to buy.

The Apple Story Continues

Apple is incredible. It’s undeniable. I’m a user of their products and an investor in their stock. I love the long term story here and am always looking for good buying opportunities of the stock. I would urge you to hold out for a better opportunity if you are looking to build an Apple position. Either way, you have to admit that Steve Jobs and the other Apple folks do a great job of gaining our attention. Enjoy the ride.

4 Comments »

  • AndyS said:

    I just bought Apple stock a few days ago (wrote about it in my blog) and looking forward to the ride up over the next few months. Good luck to both of us!

  • scottyb said:

    Why do you consider Apple’s share price high? Have you done the financial analysis to justify your comment?

    The stock price is only indirectly related to the company’s products. By “built in”, I think you mean investors have done the analysis which determines the present value of earnings (or cash flow) over the long term with an assumed (guessed) growth. The only thing that increases the stock price is unexpected growth in earnings, caused by unexpected products or unexpected popularity of existing products.

    What is your assumed growth rate of earnings over the long term for Apple?

  • Constable Odo said:

    How can the iPhone be factored into the share price already? In December 2007, Apple’s stock price was $200 with the iPhone selling in four countries. Now there’s almost 70 countries and the stock is at $185. That doesn’t make any sense at all. I think the only product that hasn’t gained much is is the iPod, but in reality the iPhone is an iPod with a phone in it. If Apple sells 12 million iPhones by the end of the year, don’t tell me that’s factored in too.

  • kevin duffey said:

    your argument is based on the idea that apple was fairly valued at $200 back in December. I think it was over valued.

    I think 12 million phones are definitely priced in. Most everybody is expecting around that much (over the 10 million Apple guidance).

    Stock prices are based on the future. What has already happened has no bearing on the stock price. Apple’s stock is expensive (high PE) because everybody expects them to sell a ton of iPhones. I think eventually AAPL will be higher down the road but don’t expect $250 next month.