There's nothing like the excitement surrounding an Apple (NASDAQ:AAPL) product launch. But what effect do new products have on Apple's share price, or on equity analysts' earnings and target price estimates for Apple?
Analysts are on average bullish on the company's outlook - the stock has surged roughly 570% since the launch of the first generation of iPhone, and Apple's mountain of cash is legendary. But there are mixed effects around the date of Apple's product announcements when it comes to its share price.
The expectations of a successful product launch seem to be already priced in before the actual announcement day. This is of course the result of rumours and publicity stunts (or whatever you want to call them) of employees 'losing' product prototypes in bars and cafés where eager media types can pick them up. After the excitement is over, the stock price often declines.
Analysts' target price revisions
In the time period leading up to and after a product launch, analysts have revised their target price ratings on Apple's stock, as can be seen in table 2.
On average, analysts have revised their view on the company's stock price upwards. In all cases, with the exception of the announcement of Macbook Air, analysts have become increasingly bullish on the stock's potential after a product launch. Even after the most recent announcement last week of the New iPad (the official name for the iPad3), analysts revised their target price rating upward by 3.5 percent, with target prices from 53 different analysts ranging from 445 to 730. And the iPhone, Apple's most successful product, continues to power ahead.
Apple hopes the launch of the new iPad will further contribute to its revenue growth and gain further market share of the tablet market. Analysts seem to believe Apple will succeed, and have revised their estimates on FY 1 earnings per share upwards, from 42.6 to 43, during the last two weeks.
Can Apple successfully deliver the growth expected by analysts? The company reports Q2 numbers on April 19th. Is Apple more like Microsoft or more like Samsung/Nokia? The results for the quarters ahead will give us more clues.
- by Sverrir Sverrisson
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.