Analysis: Apple shares see average 4% boost around major events
With Apple's annual developers conference rapidly approaching and expectations for a 3G iPhone launch at the conference running high, Piper Jaffray analyst Gene Munster has taken a look back at how shares of the company have faired around similar events.
Specifically, the analyst examined the stock's performance around the last 14 product launch events dating back to the 2004 introduction of the iMac G5 at the Apple Expo in Paris -- a trade show the company is believed to have ducked out of this year for unspecified reasons.
On average, he found shares traded down 0.7% the day of the event, up 0.4% from the day before to the week after an event, and up 4.2% from the week before to the week after an event.
The two largest gains came around the Macworld 2007 iPhone announcement and the Paris Expo 2004 iMac G5 announcement, when shares rose 15.9% and 15.1%, respectively, from the week before the events to the week after.
Meanwhile, the two biggest slides followed the company's 2005 WWDC announcement that it would transition to Intel chips and the 2008 Macworld introduction of the MacBook Air. Shares fell 11.5 percent and 9.1 percent, respectively, during the two weeks surrounding those events.
In his report, Munster said he believes Apple's efforts during 2008, including this month's expected launch of a 3G iPhone, simply represents the groundwork for 2009 to be a breakout year for the iPhone.
"The bigger picture is beyond the 3G iPhone," he wrote. "We are bullish on the iPhone in 2009 based on our belief that there will be a family of iPhones by January of 2009, availability of 3rd party apps, global distribution, and carrier subsidies."
For the next month or so, he expects that investors will focus on initial 3G iPhone sales performance but then quickly shift back the Mac, which currently stands as Apple's biggest growth driver, with sales rising some 50 percent in April, according to the latest market data from IDC.
"While Mac units will likely not finish the quarter up 50%, we believe the April NPD points to June quarter Mac upside," Munster wrote. "The bottom line: while the Street is aware that Apple is gaining market share, we believe the magnitude of the shift is being underestimated."
The analyst reiterated his Buy rating on shares of Apple with a price target of $250 per share.
Specifically, the analyst examined the stock's performance around the last 14 product launch events dating back to the 2004 introduction of the iMac G5 at the Apple Expo in Paris -- a trade show the company is believed to have ducked out of this year for unspecified reasons.
On average, he found shares traded down 0.7% the day of the event, up 0.4% from the day before to the week after an event, and up 4.2% from the week before to the week after an event.
The two largest gains came around the Macworld 2007 iPhone announcement and the Paris Expo 2004 iMac G5 announcement, when shares rose 15.9% and 15.1%, respectively, from the week before the events to the week after.
Meanwhile, the two biggest slides followed the company's 2005 WWDC announcement that it would transition to Intel chips and the 2008 Macworld introduction of the MacBook Air. Shares fell 11.5 percent and 9.1 percent, respectively, during the two weeks surrounding those events.
In his report, Munster said he believes Apple's efforts during 2008, including this month's expected launch of a 3G iPhone, simply represents the groundwork for 2009 to be a breakout year for the iPhone.
"The bigger picture is beyond the 3G iPhone," he wrote. "We are bullish on the iPhone in 2009 based on our belief that there will be a family of iPhones by January of 2009, availability of 3rd party apps, global distribution, and carrier subsidies."
For the next month or so, he expects that investors will focus on initial 3G iPhone sales performance but then quickly shift back the Mac, which currently stands as Apple's biggest growth driver, with sales rising some 50 percent in April, according to the latest market data from IDC.
"While Mac units will likely not finish the quarter up 50%, we believe the April NPD points to June quarter Mac upside," Munster wrote. "The bottom line: while the Street is aware that Apple is gaining market share, we believe the magnitude of the shift is being underestimated."
The analyst reiterated his Buy rating on shares of Apple with a price target of $250 per share.
Comments
I wonder how many time windows they had to look at to get the result that they wanted?
"There are liars, damned liars, and statisticians."
change' event?
The overall average increase (two-week period covering the change) shown in the chart
is 4.2%, but if you assume that this will be a positively-received announcement,
the average of those is a 8.85% increase.
Not bad for two weeks!
My question is . . . will WWDC '08 be a 'positive change' event, or a 'negative
change' event?
The overall average increase (two-week period covering the change) shown in the chart
is 4.2%, but if you assume that this will be a positively-received announcement,
the average of those is a 8.85% increase.
Not bad for two weeks!
I can't see how next Monday could be a downer.
Release of new platform that everyone's ready for, sexy new phone - now launched in like forty more countries than the first one - a new mild revenue stream from the App Store, and depending on whether Jobs convinced labels: additional revenue from 3G iTunes purchases.
Oh and if you are one to read deep into their imagery and into the news surrounding their web services revamp: some totally new addition to communication infrastructure AKA 'Me' and whatever the hell crazy money schemes go with that.
Based on history, I'd expect AAPL to be up 5%. Based on expectations of no "one more thing" this time around, it seems like a pretty safe bet. Only real risk is if they announce that iPhones won't be available until July. I still have trouble believing in the $250 number though... unless consumer sentiment gets back on track.
No two consecutive ill-recieved announcements on a two-week horizon. Many of the significant downs on either a one-week or two-week horizon were overblown. WWDC Hasn't historically had as big of a move as MWSF.
Based on history, I'd expect AAPL to be up 5%. Based on expectations of no "one more thing" this time around, it seems like a pretty safe bet. Only real risk is if they announce that iPhones won't be available until July. I still have trouble believing in the $250 number though... unless consumer sentiment gets back on track.
$250 isn't that had to get. That is less than 65 points in one year.
I am selling my Apple Stock as I think it will take a dive next next week. I will buy back in then.
I wonder how many time windows they had to look at to get the result that they wanted?
"There are liars, damned liars, and statisticians."
The "standard" in a lot of academic finance literature that does so-called "event studies" is 3-day or 5-day windows around the event date: i.e., Day[-1,+1] or Day[-2,+2]. A week before/week after is unusual.
Also, the "event" in question is assumed to be a surprise (i.e., not already known or factored in by the market), so that makes this analysis a bit spurious.
I can't see how next Monday could be a downer.
Release of new platform that everyone's ready for, sexy new phone - now launched in like forty more countries than the first one - a new mild revenue stream from the App Store, and depending on whether Jobs convinced labels: additional revenue from 3G iTunes purchases.
You answered your own question. All of that is already known and priced into the market. Unless Apple comes up with something unexpected and positive, the stock will probably drop.
The "standard" in a lot of academic finance literature that does so-called "event studies" is 3-day or 5-day windows around the event date: i.e., Day[-1,+1] or Day[-2,+2]. A week before/week after is unusual.
Just did a few quick calculations:
N = 11
mean = 4.21
sample variance = 89.42
If we test to see if the observed mean is significantly different from 0 we are testing the statistic of means of N = 11 observations. This statistic is a T-Statistic (if I'm remembering correctly) with 10 degrees of freedom, and assumed mean of 0 (for the hypothesis test) and a variance of 89.42/11 = 8.13.
Thus, the observed 4.21 is 1.47 standard deviations from 0 and the p-value is 8.5%. This indicates that (assuming that the true mean is 0%, i.e., no effect) 8.5% of observations (the means of samples of size 11) will be expected to be at least as large as 4.21. If we consider the fact, that the analysts looked at a number of time windows -- in, fact, let's assume that on top of the 3 time periods are mentioned explicitly in the article, they looked at +1/-1 and +2/-2 days (as you mention), then they had 5 shots at hitting a number at least as "interesting" as +4.21%:
1 - (1 - 0.085)^5 = 35.9%
(This assumes independence of the events, which isn't quite true, but is probably fine for the purposes of illustration) Thus, with only 5 different time windows, they had a 36% chance of observing a number at least as interesting as the 4.21% indicated in the article. The more windows they looked at, the higher this percentage would be. In fact, by the very fact that, had they not observed anything "interesting" they would have not mentioned it (publication bias, anyone?), we can conclude that this small positive value is an anomaly of sampling a distribution whose expected value (in all likelihood) is zero: we are about as likely to see the stock prices rise in the next two weeks as we are to see them decline. As I said, "there are liars, damned liars, and statisticians."
The above chart posts a more volatile picture of the market's reaction.
The drop on Sep 5, 2007 was during AAPL's uptrend where the stock dropped, created a cup and handle formation and continue to rally on to 200.
The drop on Jan 15, 2008 was right in the middle of AAPL's drop from 200 to 120. Probably a bit unfair to attribute it to the iPod touch launch. AAPL's $200 drop in iPhone's price could also have fueled a frantic sell-off indicating Apple's eagerness to boost sale volume by lowering margins.
The Jan 9, 2007 event was probably one of the most significant in Apple's history as it entered a completely new market. The iPhone was largely expected but confirmation of the news sent the stock price roaring.
The Jan 9, 2007 event was probably one of the most significant in Apple's history as it entered a completely new market. The iPhone was largely expected but confirmation of the news sent the stock price roaring.
God that event was nuts from an Apple-watcher perspective.
The phone seemed inevitable at that point but ARM OS X? Multi-touch? A single interface button? *Total* skeet-skeet all over the pessimists.
New market, spine-tingling design and an incredibly tall list of ambitions.
You answered your own question. All of that is already known and priced into the market. Unless Apple comes up with something unexpected and positive, the stock will probably drop.
Not good enough:
They've now had a year since release to make at least one new interesting piece of preloaded software. The subtle insertion of img geotagging is one Minesweeper flag for possible off-the-wall GPS utilization.
But from information we do have about v2.0:
The effect of App Store is *not* at all all known. We don't really know about any of countless projects being brought out just for the App Store start. The better jailbreak apps that are being ported to the SDK/App Store specs are also not in public mindshare and aren't really an accountable factor to wall street.
Maybe all that'll take to maintain stock interest regarding iPhone software is showcasing three home-run zero-day 3rd party apps and the devs behind them talking about how remarkable the Xcode tools are.
Why is Apple conjecture so fun to think about?