Apple (AAPL) shares have had a great run over the past year. On February 16, the shares hit a new 52 week high of about $364.90 per share. With a market cap of about $322 billion, it's one of the most valuable companies in the world. The company has had huge success creating products that are in high demand worldwide, to people of all ages and income levels. Steve Jobs is a genius and the company has thrived under his leadership. Every time I go to the local mall, I am reminded of the demand and passion for Apple products as the Apple stores are packed full of consumers, while by contrast, the neighboring clothing and other stores are empty.
One of the main catalysts for propelling Apple shares to new highs has been the iPad, which was first released around April 3, 2010. At this time, Apple shares traded for about $235 per share. Since then, the iPad has become somewhat of a category killer with little competition as of yet. However, I don't see any brand new category killer type products coming out of Apple soon. Small improvements to existing products such as a newer iPad or a less expensive iPhone are not going to be enough to move the shares in the way that the iPad release helped boost Apple shares from about $235 to current highs around $364.
At the same time, all this success has put a target on Apple. Plenty of new products to compete with the iPad are being introduced:
- Samsung's (SSNLF.PK) new "Galaxy" tablet (recently released).
- Motorola (MSI) Xoom "Android Smart Tablet" (to be released around February 24). This tablet has a larger screen than the iPad and has a camera on the front and the back.
- RIM's (RIMM) "Playbook" (to be released around March 2011) which will compete with the iPad.
- HP's (HPQ) Touchpad (to be released mid 2011)
You can see a comparison of the iPad, the Xoom and the Touchpad here.
Google's (GOOG) Android based phones are doing well and are a challenge to the iPhone. Of course, Apple has a huge lead in the number of available apps. There is a passion for Apple products which I don't see with any other company and this will make it hard for competitors. I think Apple will maintain a clear lead with its iPad and iPhone, but all this new competition in the tablet market is going to take some market share away from the iPad and affect growth.
Because of all this, Apple shares look like they might be ready to pullback from the recent highs. There are continued concerns over Steve Jobs leaving the company so that he can focus on his health. The 200 day moving average for Apple shares is about $290.16. The 50 DMA is about $337.52. When you see these shares are trading significantly above the 200 DMA, and even over the 50 DMA, it would make sense to wait for lower prices before buying. I think at best, the shares will trade sideways for awhile, however, I think they are more likely to drop. Apple shares have had many corrections on the way up, so it's best to be prepared for when they correct again. I think the stock market overall is due for a decline as well.
The future looks bright for Apple as long as it continues to innovate. The consumer demand and passion for Apple products has generated so much momentum that the upward trend in sales should continue for the foreseeable future. I also expect that Apple will announce a stock split someday, and that could help generate more investor interest in the shares. Because of the nice run in these shares, I would only buy when Apple shares undergo any substantial correction to around the $300 level or of course less.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.
