"Cannibalization" was the word on everyone's lips yesterday,
as consumers, technology geeks and analysts pondered the pros and
cons of the new mini iPad ceremoniously unveiled by Apple (
AAPL
) on Tuesday. Does it have enough of the right features? Is its
price point - starting at $329 - too high when compared to rivals
like Amazon's (
AMZN
) Kindle Fire? The stock ended the day in the red both the day of
the announcement and yesterday amidst all the fretting.
Here's another question: do those questions really matter?
Let's take a look at how Apple's stock has fared in the aftermath
of previous key product announcements. Taking a randomly-chosen
period of 30 days, the pattern is for Apple's stock to record
relatively modest advances or declines. After the debut of the
iPhone on January 9, 2007, for instance, Apple's share price
tumbled 10.1%. The release of the iPhone4 on June 7, 2010 and the
iPhone 5 on October 4, 2011, were marked by gains of 3.8% and
7.45%, respectively. When it comes to the iPad, a similar pattern
is seen, with gains of 1.57% after the product's debut in January
2010 and 2.15% in the 30 days following the announcement of the
iPad 2 on March 2, 2011. Only the "new iPad" broke that pattern,
and it may be that 30-day performance that Apple investors have
stuck in their minds when they fret that the market is responding
negatively to the mini iPad. A
stock chart
helps.
AAPL
data by
YCharts
What matters a lot more, however, is what Apple's stock price
and its valuation have done over the long haul since the launch
of each of its iconic products. It's hard to paint a more
positive picture.
AAPL
data by
YCharts
The chart above shows how Apple's stock has performed since
the first iPad was "born" - and if you think the combination of
the decline in its
PE ratio
and the rise in its stock price is remarkable, you may want to
ponder the next chart, which shows the same data for the period
that has elapsed since the debut of the iPhone:
AAPL
data by
YCharts
As for the iPod, well, trying to chart the price movement over
the last 11 years - the mini iPad was announced on the 11th
"birthday" of the iPod - results in an image that looks slightly
absurd. Let's just say that the stock price has soared from about
$9 (adjusted for splits) to more than $600 today. And yes, the PE
ratio has come down over that period.
The fact is that investors, regardless of their immediate
response to new products in the day or two after the formal
unveiling, have appeared somewhat reluctant to either add or
subtract much from the company's valuation in the weeks
immediately following those announcements. (The sole exception
was the release of the third-generation iPad earlier this year.)
Instead, they tend to wait for evidence, in the shape of higher
sales, and then drive the stock price significantly higher.
And even then, as the stock price has risen, the P/E ratio has
remained low. No wonder that analysts have formed a de facto "700
club", arguing that Apple's shares are worth at least that much,
and that Canaccord Genuity analyst Michael Walkley took a step
further on the occasion of the iPad Mini to boost his own stock
price target to $800. These are products that consumers have
proven themselves ready to buy, whether in recessions (the iPod
back in 2002; the iPhone in 2007 to 2009) or in boom times, and
there's no reason to suppose that a mini version of the iPad will
miniaturize Apple's returns on that investment.
Suzanne McGee is a contributing editor at YCharts, which
includes the just-released
YCharts Pro Platinum
for professional investors.