Having bounced nicely off their recent low below $400 per share, Apple shares have been heading higher ever since. The question that investors now want answered is whether the stock can reach $500 and beyond anytime soon. While competition for the iPhone from Google Android devices and for the iPad from Microsoft, particularly given the recent news that Microsoft may be acquiring Nook Media from Barnes & Noble, are factors, the single biggest threat to Apple's race to $500 is the broader market. If the market can avoid a correction, Apple has a chance. If not, it's likely to put the next century mark on hold for at least a few months.
In the immediate term, Apple is facing some real challenges that are primarily a product of timing. In the last earnings call, CEO Tim Cook alluded to several new products that will come out of Cupertino "this fall and beyond." In the interim, Samsung is expected to roll out several new versions of the Galaxy S4 and launch its own operating system later this summer. You should also expect to see new smartphone offerings from Nokia , which recently made clear that it's sticking with Windows as long as CEO Stephen Elop is at the helm. Finally, with BlackBerry bringing the Q10 to market, Apple is waiting on the sidelines while all of its competitors push ahead. The slow product cycle is one of the chief complaints some have with the iPhone maker.
Hopes are waning that Apple might accelerate its product cycle to match its competitors, as mounting evidence comes in that fall really does mean fall, and Android, Windows, and BlackBerry are likely to get the summer to themselves. Apple supplier Pegatron is rumored to be building its labor force but up to 40%, but slowly over the next several months. In addition, LCD-maker Sharp is said to have plans to ramp up production, but not until June. What all of this suggests is that a surprise early release is highly unlikely.
The biggest risk to $500
As anyone who follows the economy knows, the stock market has been on a tear of late, hitting progressively new highs. While the earnings news for the quarter has been solid, the run-up in the equity markets has been largely attributed to the continuing action of the Federal Reserve. There is a great concern that when the Fed removes its support from the financial markets, the house of cards that has been created may tumble, taking the major indexes with it.
Leaving such a severe outcome aside, the stock market is due for a healthy correction if it's going to keep running higher. When that happens, it's unlikely that Apple will be able to remain completely unaffected; you should expect to see shares trade lower as a result of any real correction. If the market doesn't correct, or if it can do so in an unusually orderly manner, Apple should be able to reach $500. If a decline occurs, don't expect to see a five-handle on the stock for several months.
There's no doubt that Apple is at the center of technology's largest revolution ever and that longtime shareholders have been handsomely rewarded, with more than 1,000% gains. However, there is a debate raging as to whether Apple remains a buy. The Motley Fool's senior technology analyst and managing bureau chief, Eric Bleeker, is prepared to fill you in on reasons to buy and reasons to sell Apple and what opportunities are left for the company (and your portfolio) going forward. To get instant access to his latest thinking on Apple, simply click here now.
Copyright © 2009 The Motley Fool, LLC. All rights reserved.