Should You Buy Apple Stock Now That The New iPhone 2.0 Has Been Released?
Finally, the long anticipated second iteration of the iPhone has been released. Jobs announced the new product yesterday at the WWDC. The new iPhone has new capabilities such as 3G support and GPS. Furthermore, Jobs announced the 8 gig iPhone will sell for $199 due to AT&T subsidies.
Now, we are all aware of the new iPhone and I’m not going to go into it any further. What we need to determine is should we buy, sell or hold Apple stock (AAPL)? Let’s take a look.
The Price Tag!
I think the most interesting part of the iPhone 2.0 announcement is the price tag. Everyone expected the new functionality and capabilities. What most did not expect (especially competitors like RIMM) was the $199 price tag.
What this means for Apple is that they will sell way more iPhones than before. What they are losing is the revenue sharing from the AT&T contracts. In the previous year, Apple has pretty much raped AT&T on paying Apple a chunk of the revenue they earn from the service. So, is this a better approach for Apple? 100% YES.
This new approach accomplishes two things. First, Apple no longer loses money when users unlock iPhones and hook them up to other carriers. They are not losing any revenue sharing anymore. Second, Apple will make up the money not earned through revenue sharing through the iTunes App Store. Apple earns 30% of all applications sold through the App Store.
The App Store
Apple has released an amazing SDK for developers to develop applications to be run on the iPhone. Furthermore, with the lower price tag on the iPhone, we can expect millions more iPhones to be sold which results in millions more potential users for a developer’s application.
With the more iPhones in play, we have more applications being sold which earns Apple more money. Plus did we mention the iPhone will go on sale in 70 countries on July 11th? Wow.
First Hand Research
I love doing “grassroots research” on a company. Since the announcement yesterday, I have heard two people I know (both over 40 years old) both say they will be buying an iPhone on July 11th when they come out. The over 40 crowd isn’t your typical Apple audience, but hey, Apple will take the money.
So, we have deduced that Apple has come up with an amazing strategy to both sell as many iPhones as possible to gain market share, and maximize the profitability through the App Store. I think it is safe to say that Apple will absolutely blow away the 10 million mark in 2008.
I have been saying now is not a great entry point for you to buy the stock. In fact, I have dialed down some of my position by selling part of it. With the new price tag and business model for the iPhone, I think that the stock is a buy now. It is a mandatory buy on any weakness.
45 million iPhones sold in 2009? Might not be so ridiculous anymore.
Do you think Apple is a buy at its current levels? Add your comment below.