Aug 20, 2012

The correlation between Apple product launch and stock price



The highly anticipated iPhone 5 release has pumped Apple price to new records as investors jump in the strongly desired stock. Still, the release date of the company’s expected to be-most profitable and famous product, is not yet clear, thus additionally fueling speculations.

For investors, it is logical that the price behaves in such a way during a pre-product release period, as everyone is full of expectations and trilled about the new features. It is interesting to see, however, how the price performs post product release date. In Chart 1, I have labeled the exact dates of the product releases of iPhone (started 2007) and iPad (started 2010). Please note that Chart 1 price scale is logarithmic.

There are some common price patterns repeated almost around every product release date:
  • The price peaks few days before release date and falls one to three months afterwards 
  • The correction after the release date is between 9 and 16% 
  • The correction is usually zig-zag shaped 

Chart 1. Apple product release dates and stock price move
As seen from the Chart 1, with the first iPhone released on 29 Jun 2007, the stock price traded in consolidation followed by a sharp rally. All following iPhone releases tend to show the same consolidating pattern in the period surrounding the release. The iPhone 3GS (released 19 Jun 2009), iPhone 4 (released 24 June 2010) and iPhone 4S (released 14 Oct 2011), have shown price drop post release days. After the iPhone 4 release, the stock lost 10% in a week, while the iPhone 4S release pushed the price with 14% in a month (see Chart 2). The optimistic thing here is that both corrections consequently triggered extremely strong bull market in which ironically no product release was announced.

Examining the iPad release date, patterns show slightly different picture. One should note that larger share of Apple’s earnings (48%) and income comes from iPhone sales thus the impact of the phone release is higher than that of the tablet. The announcement of the first and third iPad proved to be bullish for the stock, while the second was followed by correction, which again triggered major rally for the stock. On Chart 2 (daily bars) you can follow the picture in detail.

Chart 2. Apple product releases are followed by correction
Based on the observation findings and combining them with the seasonal patterns of the Apple stock (Apple seasonal patterns with strong predictability power) we would expect the price will continue rising until the iPhone 5 release date (expected mid September). This is to be followed by a correction in the following month. Based on the experience from previous corrections, the pull back should not be deeper than 16%. The support level is determined by the 200 day moving average, which projected to that date gives $565. Thus the area falling between 590 and 565 could present a good buying opportunity.

It is clear that no one can predict the future, however, there is a strong logic in stock price moves based on a product release cycle and on seasonal basis. This could be used during the process of an investor decision making. Several times, Apple investors have followed a “buy the rumor sell the fact” strategy. Whether they will repeat it again we are about to see in coming months.

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3 comments:

  1. This ended up being spot on ... however will the rest of his prediction be right ? It got to exactly 703.. then dropped even further to around 520 , but over a longer period... is it going back to 700 and above as predicted ?

    ReplyDelete
  2. Current Autumn-Spring period turn out to be quite dark compared to the previous ones. As the price get even lower $520s the tech giant is clearly undervalued. Whether it is going back to $700 again? Probably yes, depending on further product development.

    ReplyDelete

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This work with autor CapitalHubs.com is licensed under Creative Commons 3.0.