Apple shares (NASDAQ:AAPL) are currently up 2.79 percent to $503.25 a share in the wake of Carl Icahn’s lobbying efforts on Twitter. Yet, the stock performance of the past two days shouldn’t diminish the overall performance over the past two months. In less than two months, Apple has indeed gained $100 billion in market capitalization.
On June 27 of this year, shares closed at $393.78, roughly back to their December 2011 level. Today’s price represents a 27.8 percent increase in just 48 days. The last time shares were trading above $500 was on January 23. It proves once again that AAPL still suffers from a lot of volatility and uncertainty.
Even though net profit is still declining, Apple reported good numbers for its Q3 2013 fiscal quarter. After multiple mixed quarters, the company managed to beat the analysts’ expectations. Retrospectively, the market reaction to Q1 and Q2 numbers was certainly too harsh when you compare it to the actual numbers. Apple still has more than $145 billion in cash and a comfortable market position. iPhone sales are still growing 20 percent year over year.
Moreover, Apple started a huge $100 billion share buyback program last year, and investors are starting to see the effects. As a result, earnings per share has mechanically increased over time. Investor Carl Icahn revealed yesterday that he was lobbying to accelerate the share buyback program. It drove the stock up 4 percent in just minutes, proving that investors are confident that Apple shares are a good component in their portfolios.
When it comes to products, back in April, Apple’s growth prospects were gloomy — the magical period of double-digit growth for both sales and profit was over. Yet, the analysts’ expectations led to distortion. For years, they were setting the bar too high for units and market share, and too low for profit and sales. Now that analysts are more accurate, the perception of Apple is changing at the same time.
While the company didn’t release any new product after WWDC (aside from the updated MacBook Air), the keynote was received very well by commentators. The star of the show was iOS 7. It proved that Apple was still ready to make radical changes to its core products without fearing backlash. In other words, Apple is still innovating.
But customers are now more likely than ever to buy old iPhone models — Apple needs to contract the production costs of old models, or to find an alternative. In addition to releasing a new flagship iPhone, it will probably release a new low cost iPhone (probably the iPhone 5C). As the company is now switching to another product strategy with the iPhone 5C right around the corner, it will become easier to understand Apple numbers in the coming months. Similarly to the iPad mini, Apple now wants to capture another segment of the smartphone market with a low cost iPhone and to stay dominant when it comes to profit. As a consequence, the company could fight back in the market share war with Android. It would give a great perception boost to Apple.
More importantly, investors are already taking into account the upcoming iPhone event. On September 19 of 2012, shares peaked at 702.10 following a very strong summer. This year, the stock is experiencing the exact same scenario and it will be interesting to see the trend following the new iPhone releases.