While Apple is expected to announce the new iPhone 5 tomorrow, what it’s not expected to do is introduce the iPad mini. A smaller version of the tablet, poised to compete against the Google Nexus and new Kindles from Amazon, may be instead unveiled at a separate event in October, analysts predicts.
And that separate iPad rollout could have interesting implications for investors who buy Apple shares in the run up to a new product announcement and then sell them off after the news is out. Basically, the typical drop in Apple’s share price in the three-months after a new product launch might not pan out as investors wind up in anticipation of the iPad mini so soon after the iPhone.
Here’s what Ben Reitzes of Barclays Capital has to say:
Historically, Apple’s stock performance has on average performed in line with the S&P 500 in the three-months following an iPhone announcement but significantly outperformed over the six-months following an announcement. Conventional wisdom seems to say that Apple should ‘sell off’ out of the iPhone launch event slated for this Wednesday – and in fact, that sell-off may have already begun. But we believe these ‘trades’ are hard to time and we can’t recall a time when an important launch like the iPad mini followed a major iPhone launch so closely.
We note that Apple’s average six-month return following an iPhone announcement is 18 percent compared to 6.4 percent for the S&P 500. Typically iPhones are launched into very high expectations but most features seem to be predicted before the event, thus creating a ‘sell-off’ when the product merely meets expectations. Later on – after about three months – we have found iPhone sales typically beat expectations and Apple’s shares benefit…Therefore, we are not surprised to see the six-month return so greatly outpace the three-month return following an iPhone announcement.
As a result, playing Apple for a big iPhone ‘sell-off’ has proven to be a risky bet over more than a few months or weeks.
If Apple delivers an iPad mini in October, and follows it up with its annual update of the 'regular' 9.7-inch iPad in March, “then it is hard to argue much of a sell-off for Apple,” he says. Reitzes adds that he believes Apple could sell more than 10 million iPad mini’s in the first quarter it's available, especially if CEO Tim Cook offers it at an attractive price and optimizes it for ebooks.
Apple's event begins at 1pm New York time tomorrow in San Francisco. The shares are down 94 cents to $661.80 at 2:19 p.m. in Nasdaq trading.
