So after I finished taking in a live blog of the Apple WWDC 3G iPhone launch event, my first reaction was that the sticker price of $199 is going to be a home run. Of course, we should thank AT&T, who is now applying a subsidy, even though they are offsetting it by increasing the service plans by $10 more per month on the basic plan.
We all remember the hype that the Motorola RAZR received during its launch and subsequent price cuts. Soon it seemed like 80% of the population were taking RAZRs out of their pockets. Of course the RAZR craze has fizzled out as it has been unable to retain the sleek image and brand it commanded during its unveiling. But the same is not happening with iPhone. Although the transition from RAZR to RAZR 2 was very quiet, this 3G iPhone has been the most anticipated gadget of the year.
As expected, it is incorporating GPS, MS Exchange support, and a thinner design (the phone is actually a similar thickness in the middle, but thinning out the edges gives it a sleeker, thinner feel.). These are all welcome additions, but the killer feature is no doubt the high-speed access to YouTube videos and rich webpages that are painfully slow on the EDGE network. It will remain to be seen how much penetration Apple gets into the enterprise market with the Exchange support. The accelerometer is also an interesting feature allowing for motion control of the phone. If you move the phone from a vertical position to horizontal, the web browser will also change its orientation. As demo'd at WWDC, there are games being developed to take advantage of this feature, such as racing games where you can steer by rotating the phone itself. Pretty cool. Even more proof how the Wii has changed the hardware industry.
However, perhaps the most influential aspect of the iPhone revamp happened a few months before WWDC...the launch of 3rd party developer support. Now the feature set of the phone will be endless, with a mass of developers already designing, tweaking, and soon....selling their apps via the Apple AppStore. By making the iPhone a two-sided platform, with one side already firmly entrenched with a projected 10M buyers in 2008 alone, Apple has unleashed the developer community to make the iPhone far and away the most useful gadget on the planet.
So how is the stock market reacting to the launch? AAPL was down approximately 2.17% (-$4.03, $181.61) to end the day of trading. Speculation is that people wanted a video chat application and that there may be supply disruptions. However, its more likely a classic buy the rumor (although this was hardly a rumor), sell the news. Although I am still long on AAPL, I believe the next 2-3 months may be a bit bumpy. The main driver of the short-term slump will of course be the current economic slump in the U.S. Most people have undoubtedly used their tax rebate checks by now, and with gas and food prices stretching wallets, even must-have gadgets like the iPhone are going to have some delayed purchases until the holiday season. Apple of course won't be alone here. I am expecting a downturn in the market going through the Q2 earnings releases. There is no doubt spending has curbed, and you can expect cautious guidance from companies going into the back part of the year.
Thus, look for a good buying opportunity on AAPL sometime in the late July/early August timeframe, before the back to school iMac season and subsequent iPod/iPhone holiday season. I will write a post shortly on technical indicators I look for to trigger buying and selling, but for now, note that Apple's PEG (PE/Growth) is currently around 1.55 and the RSI is hovering around 50.
Monitor the earnings growth projections after the Q2 earnings report and when the PEG gets to 1.2 and the RSI gets to around 20, be ready to add to a long position going into the back half of the year.
Comments