Apple stock falls after announcements
Excitement and disappointment over Apple's new products sent its stock on a roller coaster ride Tuesday as investors reacted to a bevy of announcements.
Apple's stock ended down just 0.4% after a volatile day during which the view on Wall Street appeared to be that the news didn't match up to the sky-high expectations and hype.
The shares closed down 37 cents at $97.99. During the day the stock traded as as high as $103.08 and as low as $96.14 — a big range for the most valuable company on the U.S. stock market.
Apple stock initially jumped as the meeting progressed, especially after the announcement of a mobile payment system. But the stock faded again after the company said its new watch would work only with iPhones and wouldn't be available until next year.
Shares bounced around $100 a share as the meeting progressed and two new models of the iPhone were announced. The stock gained following the plan to allow consumers to add credit card information to their phones. The gains held as the company unveiled the much rumored $350 smartwatch, but evaporated as the timing and iPhone requirement was revealed.
The company was widely expected to announce an update to its iPhone smartphones with a larger screen in an effort to catch up to innovation in that area from Samsung and Microsoft's Nokia. Analysts were also expecting the company to announce a watch.
Analysts expect the company would charge more for the model of the phone with the larger screen, a move to defend the company's relatively high operating margins. Defending profit margins is a key part of the stock's success and increasingly difficult as competition heats up.
The company said the new iPhone will come in two sizes, a regular-sized 4.7-inch one and a super-sized 5.5-inch one called the iPhone 6 Plus. The company only provided prices including subsidies connected with a two-year contract. With that contract, the iPhone 6 will cost between $199 and $399 depending on how much memory it has. The iPhone 6 Plus will start at $299.
The Apple Pay service was also expected by investors and analysts. Even so, seeing the service this close to reality was unnerving to eBay investors, who sent the stock down $1.50, or 2.8%, to $52.73. EBay's PayPal unit has been moving to become more of a mobile payment service, but now it will have a new competitor to deal with.
But the fact the Apple Watch won't be available until next year is a bit of a surprise. Apple has long been known to capture excitement over products by being ready to ship while the hype and anticipation is still there. "The Apple Watch was more expensive than we had anticipated, will miss the holiday selling season, and must be tethered to an iPhone, which we believe will limit its revenue potential in the near-term," says Bill Kreher, analyst with Edward Jones in a note to clients where he reiterated his "hold" rating on Apple stock.
A shaky announcement day reaction by the stock is the norm. Apple shares stock have gained 0.3% on average on the first day following the previous iPhone announcements, which is equivalent to the average gains of the market on the same days. The stock fell 2.3% on the day the iPhone 5s was introduced last year.
The fact is Apple delivered what investors essentially expected. Investors, though, tend to demand more from the market leader. "Expectations were close to reality," according to a report by UBS tech analyst Steven Milunovich to clients. "We will review our estimates, though we don't expect major changes."
