Nokia’s China Mobile Deal
China Mobile is the largest wireless network in the world with over 700 million subscribers. Apple’s iPhone is not accessible to many Chinese mobile users, as China Mobile has still not reached an agreement with Apple. Apple’s iPhone is so far only available to the Chinese users through China Telecom Corporation Limited (NYSE:CHA) and China Unicom (Hong Kong) Limited (NYSE:CHU). The two mobile carriers are significantly smaller in comparison to China Mobile, and the 3G user base of both companies combined is still not large enough for Apple to penetrate the Chinese market effectively. Several analysts and trade pundits expected Apple to launch the sales of iPhone 5 with China Mobile; however, with Nokia scoring the deal and Apple still struggling to reach an agreement, this has led to an increased disappointment among investors.
However, the outlook of investors on Apple seems a little short-sighted, as it is expected to reach an agreement with China Mobile in the near future. Therefore, Nokia’s deal with China Mobile should not carry any notable affect on Apple’s stock price in the long run.
No Special Dividend Announcement from Apple
Several Wall Street analysts did not expect Apple to pay out any dividends in the 4th quarter of 2012, as most of its cash is held outside the US. Many US-based large multinational firms planned to pay out special dividends before the hike in the federal tax rates on dividends, but Apple’s participation seemed unlikely as more than $120 billion in cash on its balance sheet is held overseas. Nonetheless, according to Wall Street analysts such as Chris Whitmore of Deutsche Bank AG; Apple being an established player possesses one of the strongest financials, thus it does not operate on small transactional benefits instead focuses on long-term growth.
Apple’s stock price has dipped by 35% since posting an all time high of $702.10. It now seems that investors may be are more concerned with their long-term growth prospects, rather than if the company will pay out dividends the 4th quarter. Wall Street analyst Christ Whitemore expects Apple to increase its pay out by 10% instead of declaring any special dividend. Thus, the disappointment of investors with no dividend declaration by Apple will only reflect in the short-term on the stock price, but going forward it’s going to be the long-term growth prospects in this intense competitive environment that will eventually determine the stock price.
Apple’s shares may be undervalued, and have a potential upside of 20% to 25% going forward. The key revenue streams are in line with the original forecast and the recent decline in share price should turn around soon.
The article Is This the Right Time to Buy Apple? originally appeared on Fool.com and is written by Sujata Dutta.
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