So last Wednesday, we got the news we were all waiting for. Apple (NASDAQ:AAPL) announced the release of a new iPad. Now, the stock traded down slightly after the announcement, and if you read my latest Apple article, you'll know I said buy if it falls below $525 on the iPad news. It did on Wednesday, and actually, fell as low as $516.22 on Tuesday, when we had that big market decline. Anyone who listened to my advice of buying under $525 is now up $20, and probably will see further gains in Apple stock. The real question for the company is what's next? Well, before I get into that, I probably should say something about the new iPad, since I didn't write about it the day of the news release. So here are the highlights.
Here is Apple's main headline for the new iPad:
Apple® today introduced the new iPad®, the third generation of its category defining mobile device, featuring a stunning new Retina™ display, Apple's new A5X chip with quad-core graphics and a 5 megapixel iSight® camera with advanced optics for capturing amazing photos and 1080p HD video. iPad with Wi-Fi + 4G connects to fast networks worldwide, including AT&T's and Verizon's 4G LTE networks, and still delivers the same all-day 10 hour battery life* while remaining amazingly thin and light. Beginning today, iPad 2 will be offered at an even more affordable price starting at just $399.Now, there will essentially be a few different versions offered. The Wi-Fi model will be available in black or white, for $499 (16GB model), $599 (32GB model), and $699 (64GB model). Now if you want the Wi-Fi plus 4G model, which you can get for either AT&T's (NYSE:T) or Verizon's (NYSE:VZ) networks, it will cost you another $130 more. So the $499 will be $629, and so on. The new iPad will be available in the US, Australia, Canada, France, Germany, Hong Kong, Japan, Puerto Rico, Singapore, Switzerland, UK and the US Virgin Islands on Friday, March 16.
Overall, we knew that a new version was coming. Apple is likely to sell plenty of them, although remember, they only will be selling it for 2 weeks this quarter. The real sales number of importance for these will start with next quarter's numbers, and that is pretty much as expected. Now, Barron's had a good article out over the weekend, and I suggest you take a look at it. The article suggests that Verizon has the best network now, better than AT&T, which will allow it to better serve the tablet area going forward (as well as smartphones). Remember, Sprint (NYSE:S) is just starting out with LTE, and Sprint will not be selling the iPad anytime soon (if at all). Sprint just got the iPhone last October, and while it is stealing customers from the other two phone names, it still is well behind in the race. Verizon should be the clear winner of the three phone companies here, but remember, the real iPad winner is going to be Apple.
So what's next for Apple? Well, I don't think we'll see any major product announcements in the next few months. From what I've heard, it sounds like Apple could release the iPhone 5 this year, but that probably won't be until the third (calendar) quarter this year (remember, Apple's fiscal year ends in September), so we're still a few months away from that. It is possible that Apple could do something else, but as far as that, remember that the iPhone and iPad accounted for more than 72% of revenues in the fourth quarter for Apple. Those are the two major product lines, so anything else shouldn't have a huge financial impact.
Since I am not expecting any new product announcements in the next few months, that leaves it down to financial announcements. Apple will report its fiscal second quarter earnings sometime in mid to late April, and that will be a huge event for both the company and the markets. Current expectations (probably to be revised higher by then) call for 42.2% revenue growth to $35.08 billion and $9.48 in earnings per share, versus last year's $6.40. Apple itself guided to $32.5 billion in revenues and $8.50 when it released its first quarter results.
But the next "Apple" financial event I'm watching for won't even be from Apple. How is that you say? Well, I'm talking about Research in Motion (RIMM). The Blackberry maker (well, and Playbook too) will report its fourth quarter and full year results later this month, and it will be interesting to see how bad they are doing, comparatively speaking. Research in Motion is almost down to making a final stand here, as Apple is just killing them on the sales front. Remember, Apple sold more iPads per week in the fourth quarter than RIMM has sold Playbooks in total for three quarters. I'm also curious to see how the Blackberry is doing, as we are starting to hear from companies switching employees to the iPhone. Research in Motion is still a profitable company, but its sales and earnings are projected to fall, both in the just ended fiscal year, and in the current one. RIMM has a new CEO in place, but his tenure may not last that long if this company continues to struggle.
So back to Apple. How about the stock? Well, it appears you can still buy it here, as everyone seems to think we will see $600 within the next few months. Yes, you can still buy it here, but of course, if you can get it cheaper, that's a better idea. We saw that occur a few times this week, and those that took advantage of it are pretty happy right now. Analysts are still increasing their price targets on the name, almost by the day. When I wrote about Apple at this time last week, the average price target was $573.56, it is now $584.26, and that number should probably see $600 in the next two to four weeks I'd say. It will get there, but there still are a few of those stubborn analysts who have targets on the name as low as $275.
But what else can you do with Apple here? Well, for those who want an additional trade, those who have followed me know I run a theoretical options portfolio for this site. For the portfolio, Apple put selling has worked extremely well. In fact, I'll have another put-sale idea for Apple this week when I update the portfolio to close out some March expiration options. How does this work? Well, you pick a price you'd be willing to buy Apple at, and you sell puts at that strike. If the stock drops below that level and the options are exercised, you are forced to buy Apple at that price, but since you've collected a premium for selling those options, your effective price is much lower. I'll use the July expiration (7/20) $515 strike for example. By selling that put, you would be forced to buy Apple at $515 if Apple drops below that level and the options are exercised. However, since you receive about $25 for selling that option, your effective price is just $490. If Apple doesn't fall below that, you still pocket the $25, which effectively lowers the price of your existing shares (if you own the stock as well). Just remember, put selling involves a serious amount of risk, so make sure you know all the specifics of your trade before hand, including any margin requirements involved with the trade.
In conclusion, Apple's iPad release this week was fairly uneventful, and the big winners will be Apple and most likely Verizon. The next events I'll be watching for will be earnings, first coming from Research in Motion. We'll get Apple earnings next month, and that will probably be the next big thing everyone will be focusing on for Apple.
Disclosure: I am short S.