Attention shifts to Apple Inc. (NASDAQ:AAPL)’s Apple Watch that is to hit the markets on April 10 as investors remain skeptical on how to trade the stock ahead of the big release. CNBC’s, Melissa Lee, notes that it might be the right time to go long on the stock as studies show that the average return could be +4.68% with a 77.8% probability of the stock trading positively after the event. The average return on buying stock on the day of release stands at +4.87% but with a 55.56% possibility of the stock trading positively for a month.
RBC Capital Markets analyst’s Amit Daryanani says people should not buy Apple Inc. (NASDAQ:AAPL) because of Apple Watch alone, but because of other catalysts such as the iPhone 6 and the expected capital allocation.
“The capital allocation that will happen right around the Apple Watch launch and the thought about its gross margin which we think it is less talked about but will continue to surprise people on the upside. Apple Watch I think expectations are fairly tempered for an Apple product among investors,” said Mr. Daryanani.
The analyst affirms that Apple Watch might end up having a neutral effect on the stock as the Street remains skeptical about its potential. However, Apple Watch should be able to contribute between 7% and 8% of Apple Inc. (NASDAQ:AAPL)’s total revenue but not enough to take off the strong tailwind being generated by iPhone 6.
The fact that almost 85% of the current iPhone 5 owners or older users are yet to migrate to iPhone 6 means Apple Inc. (NASDAQ:AAPL) still has a strong tailwind in terms of demand. Heading into the June quarter, where comparisons with iPhone 6S could start getting tough. The potential in the streaming business according Pete Najarian is another aspect of the business that should have a considerable impact on the stock going forward.
Karen Finerman, who is long on the stock, is maintaining a cautious approach heading into the big release with Guy Adami affirming it is best to own the stock rather than trading it.
“I wouldn’t attempt to trade around the announcement or the launch because you have to know what sentiments it is. It is hard to get a sense for exactly what people think the average is going to be and beat that; if you want to be long, be long,” said Mrs. Finerman.
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