The iPhone 5C Crushes Apple's (AAPL) Hope of a Quick Rally

Apple (AAPL) investors were not too pleased last week after the company's introduction of the iPhone 5C. Shares of the tech giant, one of the most watched stocks in the market, dropped more than 6% in the days following the announcement, which also included an updated version of the iPhone, the iPhone 5S. Daily Chart

The main problem with the plastic iPhone 5C, which comes in five colors and prompted many industry watchers to draw comparisons with Nokia's (NOK) Lumia series, is its pricing strategy.
The unsubsidized price of the iPhone 5C comes in at $549 to $649, only slightly lower than the iPhone 5S. This definitely wasn't the low-cost iPhone to dominate emerging markets that analysts had been expecting. Nokia's Lumia 520, which only costs $99 unsubsidized, is currently making strong gains in the lower-end market and is the most popular Microsoft (MSFT) Windows phone worldwide. There is also a looming fear of the iPhone 5C cannibalizing sales of its all-important iPhone 5S -- which occurred last year with the release of the iPad Mini. Before that, the iPod Nano and Shuffle cannibalized the iPod, followed by the iPhone cannibalizing the iPod. Last year, combined sales of the iPhone and the iPad accounted for over three-fourths of Apple's top line. Therefore, Apple hasn't been diversifying away from these two product lines -- rather, it is fragmenting them further as they are shrinking. To put the problem into perspective, Apple's share of the smartphone market declined from 18.8% to 14.2% between the second quarters of 2012 and 2013, respectively, according to a recent report by Gartner. Samsung's share rose from 29.7% to 31.7% during the same period. In tablets, the numbers are even bleaker. The iPad's market share plunged from 60.0% to 32.4% during that time. The problem is obvious -- the market is being fragmented by too many Android competitors, with even Microsoft's Windows Phone regaining a small niche market share. That lost market share translated to anemic 0.9% year-on-year revenue growth and a 21.8% decline in earnings last quarter. Therefore, Apple is splitting up its market as it is shrinking, and many analysts had hoped for a much cheaper smartphone to capitalize on emerging markets like India, where Nokia (soon to be Microsoft's handset division) still enjoys a strong foothold with its Asha and lower-end Lumia brands. That's why many fans of the company and the stock have been pushing for a new area of growth outside phones and tablets -- such as smart televisions or smart watches. However, neither product has been announced yet, and the public continues to speculate if Apple is truly out of ideas, with nothing left up its sleeve. Other News About AAPL iPhone 5S: Apple's Golden Ticket? Can the iPhone 5S excite customers and investors again? Give Apple Your Finger Print? It's Your Call Is Apple's new fingerprint scanner necessary or superfluous? Other Stocks in the News Should Apple Buy Nuance to Boost Its Health Care Footprint? Why should Apple buy Nuance? The Future of Health Care as Seen Through Glassomics Will these new advances in wearable tech improve healthcare? Copyright 2013 by, Inc. InvestorGuide has no control over the sites we link to, is not affiliated with these sites, and cannot take responsibility for their quality or suitability. The news, analysis, commentary and profile information is not meant to be comprehensive, and the data provided is not guaranteed to be accurate. WebFinance Inc., the publisher of this newsletter, is not a registered investment advisor or a broker/dealer. This is not a stock recommendation newsletter but rather a source for investment ideas, and we encourage you to fully research any company before considering investing. The opinions expressed herein are those of the author and do not necessarily represent the views of nor are they endorsed by WebFinance Inc. No employee of WebFinance has owned or currently owns any shares in the company described above. The above is neither an offer nor solicitation to buy or sell any securities. The trading of securities may not be suitable for all potential readers of this newsletter, and the purchase of stocks mentioned in this newsletter may result in the loss of some or all of any investment made. We recommend that you consult a stockbroker or financial advisor before buying or selling securities or making investment decisions. We are not responsible for claims made by advertisers and sponsors. Anyone who makes decisions based on what they read here does so at their own risk and cannot hold WebFinance Inc. (DBA, Inc.) or its employees responsible.

Published on Sep 16, 2013
By Leo Sun
Leo Sun
Leo Sun is a freelance finance writer and position trader. He focuses on a combination of value and momentum investing, with a strong interest in the trading philosophies of Warren Buffett and Peter Lynch. Leo also has experience writing articles to help small business owners acquire loans and manage their finances. He regularly contributes to the Stock of the Day analysis.

Copyrighted 2020. Content published with author's permission.

Posted in ...