Apple (NASDAQ: AAPL) reports its first-quarter results on Jan 23. Earnings for last year's first quarter showed record quarterly revenue and profit, driving Apple's stock 6% higher on almost twice the volume of the previous day. Will this year's earnings report do the same?
Changed Dynamics
In the previous year’s earnings release, Tim Cook, Apple’s CEO was extremely upbeat about the company’s prospects. He promised new products in the pipeline and waxed excitedly about the record-breaking sales in the previous quarter. Apple stock rose to an all-time high of over $700 late in the year.
The pent-up excitement over Apple’s rosy future appears to have suddenly gone awry, with the stock tanking more that 30%. In Sep 2012, I wrote about profiting from the possible downward trajectory of the stock, and I was spot on with my prediction. But I didn’t expect things to go south so quickly. Is Apple's slump coming to an end now? Let’s find out!
Robust competition.
First, the competitive landscape has changed dramatically over the past few months. It is one thing for a company like Samsung to put out great new products. It is another thing to witness customers rapidly adopting those products, as evidenced by better company earnings reports. Consumers are turning to the Samsung Galaxy and other smartphones from Nokia (NYSE:NOK), HTC, LG and others. Greater adoption rates of competitor offerings changes the dynamics of overwhelming advantages that Apple has recently enjoyed.
2013 brings robust competition to the smartphone marketplace and somewhat muted competition in the tablet marketplace. There is a plethora of choices as far as mobile phones and smartphones go. As recently as one year ago, the competitive landscape was not as abundant with choices.
The tablet scenario is different. The Surface tablet from Microsoft, the Galaxy Note 10.1 from Samsung and the Nexus from Google are all competitors to the iPAD, but do not offer a compelling threat as of now.
Research in Motion (NASDAQ: RIMM) is introducing the Blackberry 10 on Jan. 30, a debut the market is anticipating with bated breath. The Blackberry Playbook, which sold just about 250,000 units in the most recent quarter, needs to do substantially better to be taken seriously. There is already considerable hype about the Blackberry 10 smartphones, and it is natural that the expectations extend to their tablet product.
Nokia recently provided a rosy outlook for its fourth-quarter 2012 earnings, to be released on Jan 24, and an optimistic outlook for the first quarter of 2013. Apparently, its decision to embrace the Windows phone platform and ditch its proprietary Symbian OS is paying off handsomely. Nokia does not offer a tablet as of now. However, a new tablet is rumored to emerge in 2013. That tablet is expected to be based on Microsoft’s Windows RT, which resembles Windows 8.
Prospects for Apple
It is clear that the competitive landscape in both the smartphone world and the tablet world is rapidly changing, making it unlikely that Apple will continue to enjoy an unchallenged advantage. As we can see, earnings results of both Samsung and Nokia allude to the erosion of first mover advantage for Apple. This is likely to pose problems for the stock.
The market expects that apple will continue to capture the imagination of its fans with new and innovative products. The Apple TV is rumored to be in the works and there is speculation of aphablet being designed as well. While retail investors are latching on to such news, Wall Street might be more skeptical.
Tomorrow’s earnings results might offer an opportunity for investors to determine for themselves what the future holds for this tech giant.
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