updated 06:44 pm EDT, Mon May 5, 2014
Aggressive reinvestment plan, expected new products resonating
As of the closing bell on Monday, Apple's stock exceeded $600 for the first time since October 26, 2012, setting a new 52-week high for the company and rising further in after-hours trading. The stock closed at $600.96 for the day and presently stands at $602.21 in the after-hours market. Apple's aggressive changes in share buyback, increasing dividends, an upcoming 7:1 stock split and expected new products coming later this year have combined to make the stock attractive again.
The real mystery is why the stock ever became unattractive in the first place. While both analysts and fans have complained that the company has gone for a long time without any "smash hit" innovations and only one "radical revamp," the new Mac Pro (which may be having more of an effect on Mac sales than first thought) in the past two years, the company continues to grow at a healthy rate, and its current products continue to be best-sellers in their class. Ongoing refinements to the OS on both platforms has been universally well-accepted, and Apple has been the leading brand of electronics at Christmas, the biggest buying season, for many years in spite of increasing competition. On top of this, the company completely dominates the enterprise and educational mobile markets.
Growth rates have slowed since the initial introduction of the company's two lead products -- the iPhone and iPad -- as both have matured, but there is plenty of evidence of new growth both in the North American and Europe segments as well as in the developing markets. Though phones running the Android platform are more widespread overall, the iPhone handily outsells its rivals (such as the Galaxy S line and the HTC One) in the "premium smartphone" category, and even the company's mid-price iPhone 5c outsells most rivals in the same price range.
Analysts, however, have a tendency to be swayed by shipment figures ("sell-in" to retailers) rather than sales to end-users ("sell-through") due to a lack of specific information on the latter from any manufacturer apart from Apple. They also worry that Apple requires a continuous stream of "disruptive" and "innovative" products to maintain the incredibly high growth rates seen after the introductions of the iPhone and iPad. Finally, they see any drop in sales as evidence that the market for that particular product has hit a peak and will not revive, such as with the iPod.
The stronger-than-expected March quarter for the company (at least in terms of iPhone sales, which handily beat consensus predictions) has also helped push the stock, along with CEO Tim Cook's admonition during the last conference call that Apple sees its own stock as seriously undervalued, interpreted by many as a hint of strong confidence in forthcoming new and refreshed products.
Even without any "completely new" products (which have been explicitly promised), there is an expected revamped "iPhone 6" expected in the fall as usual, with rumored larger screens (which could prove a major selling point against Android rivals), along with refinements in the existing iPad Air and iPad mini line. The Apple TV continues to grow as a significant (albeit minor compared to Apple's mobile products) business, and a refreshed Mac mini , MacBook pro and iMac are expected later this year as well (not to mention iOS 8 and OS X 10.10, presumably previewed at this years WWDC).
On the speculative front, rumored new products include a revamped Apple TV unit or some other product related to television, a health-centered "iWatch" product, a mobile payments system and a "phablet"-sized 5.5-inch future iPhone model (which may not be introduced this year). Of less impact to the stock but still important to the company overall, Apple is likely also working on further improvements to its iWork suite of apps, its iBooks Author software (primarily aimed at education but also quietly popularizing e-book publishing) and its already-popular iBeacon messaging technology.