A few days ago, I wrote a somewhat bearish article on Apple Inc. (NASDAQ:AAPL) listing all that is wrong with the giant company. In this article, I want to see if I can make out a relatively bullish case for Apple.
Apple May Be Undervalued
Apple’s stock price crashed 6.5% on Dec. 6, resulting in $35 billion attenuation in the market capitalization. The stock price is currently trading at $457 per share. This stock crash is the biggest loss that Apple has incurred in nearly four years. Many analysts have attributed the loss to several reports that coincided on that day having a snowball effect on Apple Inc. (NASDAQ:AAPL)’s stock price. Research firm IDC indicated that the decline is to be blamed on the dipping tablet market share. According to IDC, Apple’s tablet market share has slipped to 44% in 2012 from 52% last year.
Apple Inc. (NASDAQ:AAPL) is now facing fierce competition in the tablet market from the likes of Google Inc (NASDAQ:GOOG)’s Nexus 7, Amazon.com, Inc. (NASDAQ:AMZN)’s Kindle Fire, and Samsung’s Galaxy Tab. In addition, no announcement of a special dividend from Apple in 2012 has further contributed to the dip. Finally, the recent China Mobile Ltd. (NYSE:CHL) deal with Nokia Corporation (NYSE:NOK) has enabled the Finnish multinational to secure China Mobile’s partnership for the flagship Lumia 920, which has enabled it to position the mobile phone as an alternative to Google’s Android. This deal channeled more panic among investors, resulting in heavy selling.
Even though the above listed factors have played an instrumental role in pulling down Apple’s share price, Trefis (Equity Research Firm) still estimates an upside of 43% on the stock price. Apple Inc. (NASDAQ:AAPL)’s tablet market share is expected to dip further in the coming years; nonetheless, the overall market size is expected to grow more than 100% by 2016.
Samsung Doubles Tablet Market Share
According to IDC, Samsung’s market share grew from 7.3% last year to 15% in 2012. Newer innovative products and low prices are driving the overall tablet market. Apple’s iPad still leads the way with 44%, and the launch of iPad mini is further expected to provide some support to the declining numbers, therefore loss of 4% to 8% market share should not have any noticeable impact on Apple Inc. (NASDAQ:AAPL)’s share price given the tablet market is expected to grow exponentially.
Unlike the smartphones, Apple’s iPad only contributes 13% to the stock value; hence the decline in the tablet market share should not send a lasting shock wave among investors. Apple smartphone sales witnessed robust growth last year, and going forward Apple is expected to sell 44 million units in the fourth quarter of 2012, which is in line with Apple Inc. (NASDAQ:AAPL)’s original forecast.