Credit: Shutterstock photo"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.
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.
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:
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.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
