Apple Likely to See Further Price Support

As Apple (AAPL) continues to reap the benefits from its revolutionizing consumer electronics with its stylish and easy to use products, the technology company has become the second largest U.S. company and is poised for additional short-term growth.

On Thursday, Apple closed at $253.35 per share, adding nearly 3.8% with a market capitalization of $239.3 billion.  This uptrend has pushed shares of the company nearly 10 times higher than they were 10 years ago.  This exponential growth has primarily been driven by the success of the iPod, iPhone, and iPad, all innovative products that have been hits with the consumer. 

As for the near future, the primary driver behind Apple’s expected growth lies in iPad sales internationally.  On Friday, Apple is expected to launch its touchscreen computer in Australia, Germany, France, Italy, Switzerland, Spain, the UK and Canada and is expected to be a tremendous hit.  The demand trend that was seen in the US, over 1 million iPads have been sold in the US since its April 3rd debut, is likely to continue in international markets.   

At Apple’s flagship store in Japan, nearly 1,200 consumers lined up outside the store before opening to get their hands on the iPad, illustrating that initial demand in Japan was just as strong as it was in the US.  This is significant because the Cupertino-Ca. based company generates nearly 60 percent of its revenue from international markets. 

From a supply and demand perspective, international demand for the iPad is expected to supersede supply, resulting in Apple selling all iPads that it ships.  In addition to the expected success of the iPad, revenues generated from iTunes, which is the largest retail music provider and has seen revenues rise by more than 400% over the past four years, and the large surplus of cash on Apple’s balance sheet add to its attractiveness. 

In a nutshell, Friday’s expected launch of the iPad overseas is likely to give the company short-term positive price support.  Some other equities that are likely to be influenced by Apple’s performance include:

  • the iShares Dow Jones US Technology (IYW), which allocates 11.45% of its assets to Apple closed at $55.65 on Thursday.
    • · the Technology Select Sector SPDR (XLK), which allocates 10.2% of its assets to Apple, closed at $21.82 on Thursday.
    • · the iShares S&P North Amer Technology (IGM), which allocates 9.18% of its assets to Apple and closed at $52.29 on Thursday.

Although an opportunity exists in Apple, it is equally important to consider the company’s dependence on consumer spending.  To help mitigate this risk, the implementation of an exit strategy which identifies specific price points at which an upward trend could come to an end is important.

According to the latest data at, this price point for Apple is $236.36.  As for IYW, XLK and IGM, the price points are $52.10, $20.79 and $48.37, respectively.  These price points fluctuate on a daily basis and are reflective of market volatility.

Disclosure: Long APPL

Categories: ETFs, Latest Weekly News

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