Apple (AAPL) is expected to unveil the new version of its popular iPad on Wednesday, but investors shouldn't hold their breath for a huge pop in the tech giant's stock price after the debut. The reason: History shows there's a big difference in how the markets greet Apple's revolutions versus its evolutions.
Wednesday's event is expected to be essentially a refresh of the existing iPad, rather than a totally new product launch. On March 5, 2010, when Apple initially unveiled the iPad, its stock closed the day up 3.9% to $218.95 a share. And shares continued to climb as the company geared up for its launch in the following weeks.
But on the day when Apple trotted out its highly touted iPhone 4 during the summer, its shares ended the day down 1.96% to $250.94 a share. While the iPhone 4 has done Apple proud in terms of sales and substance, it was in the end just a redesign of an existing product.
The Jobs Factor: Will He Show Up?
"I don't expect to see a material reaction to Apple's stock tomorrow," says Brian Marshall, an analyst with Gleacher & Co. "This is a refresh of the iPad, and it's widely expected. It's just part of the overall [product] roadmap."
Mike Abramsky, an analyst with RBC Capital Markets, wrote in a research note last week that he didn't expect any surprises at Apple's event tomorrow and that it will likely include milestones for iPad sales and possibly new applications and content partners for the device.
He added that Apple CEO Steve Jobs isn't expected to make an appearance at the event.
If Jobs does show up, that could juice Apple's stock Wednesday. It has been some six weeks since he made the announcement that he was going on medical leave, and his health issues have left many pondering the company's post-Jobs prospects.
"If he shows up, it will be an instrumental feature in the stock's performance," says Ashok Kumar, an analyst with Rodman & Renshaw. "If he doesn't show, it won't tank the stock."
Back in June 2009, Jobs was on a medical leave and also a no show when Apple unveiled the iPhone 3GS at the company's worldwide developers conference. Apple's stock that day ended down a slight 0.5% to $143.85. But roughly three months later, when Jobs made a surprise appearance at the unveiling of the latest version of the iPod nano, Apple's shares ended the day up nearly 1% to $172.56.
Can Apple Meet iPad 2 Demand?
Given the increasing importance of the iPad in Apple's revenues, pricing the device will be of importance to investors. Marshall notes: "Where the pricing comes out will be one of the most interesting things from tomorrow's event."
Apple currently sells its iPads for $499, and any price cut would be a surprise, Abramsky said in his report. He expects the devices to hit the stores sometime later this month or early April and sell roughly 30 million units in the 12 months after launching. iPads accounted for 17% of Apple's $26.7 billion in revenues during its fiscal first quarter that ended in December.
Some are concerned, however, that iPad supplies will run short, which could sap Apple's momentum for quarter that ends in June. For that period, the iPad 2 will be Apple's "It" product, and the company's ability to maximize revenue will depend on whether or not it can keep up with demand. In the summer, that dynamic will shift again as Apple gears up for its anticipated revamped version of the iPhone.
Attack of the Tablet Clones
Investors are already keeping a watchful eye on Apple's longer-term future. Some are concerned about its projected growth arc: Revenues are expected to rise by 50% this year but drop off to a 20% growth rate next year, Kumar notes. Apple's growth has generally been driven by its own creative efforts as opposed to acquisitions, he says. Kumar says he still considers Apple's stock an attractive buy.
"The iPad has been the tablet [computer], and the tablet is the iPad," says Kumar. "Apple shipped 7.3 million iPads in the December quarter, or 2.5 million per month, and its competitors have done only a fraction of that."
Jobs, though, appears worried about the onslaught of tablet competitors, given his rant last fall about tablets powered by Google's (GOOG) Android mobile operating system and others. As Research In Motion (RIMM) launches its BlackBerry PlayBook, Samsung makes its Galaxy Tab a viable iPad competitor, and Motorola Mobility (MMI) kicks off its Xoom, it will be interesting to track the iPad's sales trajectory in the coming quarters. Just how bountiful will Apple's harvest be?
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