Will iPhone 4 Send Apple Stock Soaring?

By Eric Fontinelle | June 24, 2010 AAA
Will iPhone 4 Send Apple Stock Soaring?

With the release of Apple's new iPhone 4, investors may be wondering how Apple stock will behave around the release. Let's take a look at how Apple's stock price has moved for the previous iPhone releases to see what we can learn.

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iPhone Euphoria
The original iPhone was met with great fanfare after CEO Steve Jobs' announcement introducing it at Macworld on January 9, 2007. Jobs introduced the phone saying, "iPhone is a revolutionary and magical product that is literally five years ahead of any other mobile phone."

Since customers were unable to buy the phone until June, Apple enthusiasts instead went on a buying spree for Apple stock. Following the surprise announcement, Apple shares jumped over 15%, from $85.47 on January 8 to close at $97.00 on January 10. Order volume for the two days soared over 100 million on both days, about four times Apple's normal trading volume before the announcement.

Just as quickly, however, the euphoria appeared to wear off. After all, the iPhone would not even go on sale until six months later, and even then its success was still uncertain. Apple's collaboration with Motorola created the ROKR E1 phone, which was largely unsuccessful. Apple stock crashed from $97.10 on January 16, and returned to its pre-announcement levels at $85.70 on January 23. (There are a number of reasons outside of marketing and the actual product that can lead to unmitigated failure. Learn more in 6 Reasons Why Products Fail.)

When the iPhone was released on June 29, 2007 the stock price rose again approximately 10% from $120.56 on June 28 to $132.30 on July 6. The amazing reception of the iPhone had customers camped out for days to be among the first to buy the new device. All told, Apple stock was up for nearly 140% for the year, with most of the gains coming after the release of the iPhone.

iPhone 3G and the 2007 Market Crash
The impact of the iPhone 3G on Apple's stock price is difficult to sort out. The phone was announced officially by Jobs on June 9, 2008, but if you look at the stock price, you'll hardly see a blip on the radar screen. Most likely this is because rumors of the iPhone 3G were leaked at least as early as April 3, 2008. So instead of seeing a sudden jump and burst of activity, it's most likely that there was slow increase in the stock price as the rumors became more and more credible. Apple's stock price was $151.61 on April 3, and increased 20% over the next two months to $181.61by the official announcement date of June 9.

Apple stock was down nearly 50% from the 3G's July 11 release through the end of the year, but it was not due to the iPhone 3G. Rather, Apple's stock price was driven down by extreme declines in the overall market. Sales for the iPhone 3G were favorable, with 6,892,000 units sold during the fiscal fourth quarter ended September 27, 2008. In October, Jobs announced that, "Apple just reported one of the best quarters in its history, with a spectacular performance by the iPhone - we sold more phones than RIM [manufacturer of the Blackberry smartphone]" (Both giants are leaders in their industries, but do both provide giant investment opportunities? Find out more in Microsoft Vs. Apple: Does Equal Size Mean Equality?)

iPhone 3GS Fails to Move the Stock
The third generation iPhone 3GS was announced on June 8, 2009. Again, there isn't much of a stock movement on the day of the announcement. Again it appears that this may have been due to rumors in late May that led many to suspect the release and buy Apple stock in advance of the official announcement. Apple stock increased approximately 10% from the time that rumors appeared to the time of the official announcement.

The iPhone 3GS was released on June 19, 2009 but there is not much of a spike on the release day either as the event was factored into the share price. Over the longer term, Apple's stock price continued to climb as Apple delivered record fiscal third-quarter results, driven in part by the sales of 5.2 million iPhones during the quarter. (The new iPhone isn't the only product to have been leaked before its release. Check out 6 Infamous Product Leaks.)

The Bottom Line
With the exception of the initial announcement of the iPhone, previous releases of the iPhone have not shown a predictable effect on Apple's stock price over the short term. As with the previous two iPhone releases, news of the iPhone 4 was leaked months before Apple's announcement and the stock price has had plenty of time to react. With the release having already been factored in to the current stock price, investors should not expect to see an immediate change in the price of Apple stock based on the iPhone 4 release.

Catch up on the latest financial news, read Water Cooler Finance: Billion Dollar Summits and Barack Vs. BP.

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