How Product Releases Affect Apple’s Stock Price

The stock market reflects all known information as stated by the efficient market hypothesis, processing and assimilating new data rapidly through the mechanism of buying and selling. The stock market is also forward-looking, which explains why a company’s stock may fall, even when reported earnings improve from the previous quarter. Apple’s stock history is a stellar example of how this works.

Large companies beat collective market expectations of their earnings to positively influence their market capitalization. It’s no accident that they often manipulate their earnings reports to match or beat estimates to artificially enhance their stock prices. As a result, earnings management is highly scrutinized by the Securities and Exchange Commission (SEC).

The release of an innovative, revenue-driving product or service is one of the few options a company has to influence its stock valuation. When Wall Street valuations are right or wrong, the reward or loss can be astronomical for investors. This is because accurately estimating the impact of an internationally distributed product on a company’s earnings and the company’s stock is a herculean challenge.

Apple’s financial performance, including its share price, relies heavily on the sales of its products. But the two haven’t necessarily gone hand in hand. A high flier through much of its recent history, Apple stock hit new all-time highs toward the end of 2021, with a market capitalization approaching a record $3 trillion.

This article breaks down Apple’s product lines and how they shape the company’s stock performance and position in the global market.

Apple’s Product Lines

Apple’s main product lines are divided into five different categories that contribute to its sales figures, including the:

• iPhone
• Mac products
• iPad
• Wearables, Home, and Accessories
• Services

The Cupertino-based company has a looming presence in each market—a reputation that can be attributed to the monopoly that the company seemingly has on innovation. The iPhone is, by far, its most profitable product line, raking in $137.8 billion in sales for the 2020 fiscal year. Apple’s services category is the second-highest-grossing segment ($53.8 billion), followed by its wearables, home, and accessories segment ($30.6 billion). Mac products and the iPad category rounded out the group with $28.6 billion and $23.7 billion in sales for 2020.

The company finds ways to create markets that didn’t previously exist while revolutionizing ones that did—a process that began with the iPod. Apple spent $18.75 billion on research and development (R&D) in 2020. By comparison, other Fortune 500 companies focus more of their energy on advertising, cost-cutting, or overall efficiency, and the difference between Apple and other companies is clear.

The Heavy Hitters: Apple Products That Made a Difference

Product releases are a potential goldmine or landslide for investors. There has been a lot of study and analysis done in the field of predicting the effects of events such as product releases, as evidenced by scenario testing through game theory. With that in mind, let us look at some of the big product releases by Apple.

Before we delve into the product lines, it’s important to remember a few key points about Apple’s stock history. The company’s stock trades on the Nasdaq under the ticker symbol AAPL. As of January 20, 2022, Apple had a market capitalization of $3 trillion, closing the trading day at $173.84.

Apple’s stock has split several times since it first went public in December 1980. The first split came on June 16, 1987, on a two-for-one basis at a pre-split price of $79. The next split came on June 21, 2000, when share prices reached $101.25. On Feb. 28, 2005, Apple split its stock again when it hit $88.99. These last two were also two-for-one splits. The company split its stock again on a seven-to-one basis on June 9, 2014, when share prices reached $646.57. The final stock split came on Aug. 31, 2020, when it split on a four-to-one basis at a pre-split price of $499.23.

The iPod

Released on Oct. 23, 2001, the first iPod held up to 1,000 songs with a battery life of 10 hours—all for the price of $399. The following day, the stock moved up slightly, from $17.81 to $18,75, and closed at $20.00 per share on Nov. 19, 2001.

While its initial effect was muted, this first iPod led a chain of similar products which set the bar for Apple’s competitors in the portable media player market. The 2003 release of the iTunes Store (and a Windows-compatible version) made the iPod a viable option for Windows users. By the end of 2004, Apple sold over 10 million iPods.

Its reign has come and gone, with more people using their phones to play music. As a result, Apple phased out the iPod. The iPod Classic, Nano, and Shuffle are no longer produced, leaving just the iPod Touch in existence. Currently the iPod is a small enough share source of Apple’s global revenue that the company reports it as part of its “wearables” category, which makes up 11% of sales (compared to around 50% for the iPhone).

The iMac and MacBook

Apple’s range of Mac products is another example of wildly successful Apple products. The iMac was released in May 1998, in which Apple dipped to $26.69. While it didn’t have an immediate impact on Apple stock, the stock rose to $43 a share in just three months—a 161% increase in its share price.

The iMac went on to become the “number one selling machine through the retail and mail-order channels in the 1998 holiday season,” according to The New York Times. Apple’s stock traded at $138.69 two years after its release—a 519% rise. The iMac’s popularity paved the way for products like the PowerBook G4 in 2001 and the MacBook Pro in 2006.

Despite their popularity, Apple’s desktops and laptops hold a small market share of global personal computers. As of the fourth quarter of 2021, its market share in the personal computer space was 7.7%.

The iPhone

This is arguably the most revolutionary tech product ever created, changing the landscape of the mobile phone market. The first iPhone was announced with much fanfare on Jan. 9, 2007. It promised users a mobile phone, an iPod with touch controls, and internet capabilities, including email, surfing, and maps.

The company sold about 270,000 units within the first 1.25 days on the market in June 2007. The company’s stock only gained seven cents the same day the phone was released. This reaction was probably muted since early sales missed Wall Street estimates. A month later, the stock’s price saw a 15.9% increase.

Apple’s iPhone 13 was released in September 2021. The iPhone 12 was released in October of 2020. As the first quarter of 2021, the iPhone held 18% of the market share in mobile phones.

The iPad

Apple created the global tablet market when it announced it was releasing the iPad in January 2010. Initial sales began in early April of the same year.

On the first day of trading following its sale, Apple stock rose slightly, a little over a 1% increase. But soon after it rose more than 40% . Apple held a market share in the tablet arena of 38% as of Q4 2021.

An interesting point to note is that Apple actually sold an earlier version of a tablet in 1993 known as the Newton MessagePad. Used as a personal digital assistant, it was a shadow of the iPad, which contained all the functionality of the iPod Touch on a much larger screen with a faster processor.

Services

Apple provides users a series of services that are compatible with its devices. This category is designed to help users stay entertained and connected through tablets, smartphones, and personal computers. And it is constantly evolving to keep up with the user demand.

The company’s services segment is made up of:

• Apple Arcade: Apple’s video game subscription service provides users with interactive games and entertainment. There are free games with the option to make upgrades through in-app purchases.
• Apple Music: launched in 2015 as the company’s music and video streaming service. It lists more than 70 million songs for purchase and download. The service also offers curated music lists, 25,000 radio episodes, and FaceTime interviews with stars. According to the company, about 90% “of iOS 14 listeners have used these new features, and engagement with Apple Music’s industry-leading lyrics feature has doubled in 2020.”
• Apple TV+: launched in November 2019. Users can choose from a variety of movies and television, along with original content produced by Apple. The service is available on Apple products as well as video game consoles and smart TVs.
• Apple Podcasts: available in more than 175 different countries on Apple devices.
• iCloud: provides users with cloud storage services. Apple allows you to store photos and videos, along with notes and other files that can be updated and retrieved on a host of Apple devices.

This category also includes Apple Care. Customers can sign up and pay for support for technical and software problems and hardware repairs and service for Apple products.

Wearables, Home, and Accessories

This segment is comprised of a series of innovative products, including the Apple Watch, smart home products (security cameras, light fixtures, electrical outlets, thermostats, wifi routers, etc.), earbuds, charging cases, cases, speakers, and watch bands.

The Apple Watch is, by far, one of the biggest drivers in Apple’s wearables, home, and accessories segment. The first version of the watch was launched in April 2015 and Apple remained tight-lipped about how many were initially sold. Analysts estimated that the company would sell over three million watches—roughly the same number of iPads it sold in the first three months when it was launched. It’s estimated that the Apple Watch made up 75% of all smartwatch shipments within its first few months.

The unit grew to $13 billion in the first quarter of 2021, representing a 30% jump from the same period of 2020. This category’s direct relationship with the services segment, like the Apple Fitness correlation with the Apple Watch, is likely to be a major driver for its growth.

The Bottom Line

There have been few Apple product releases that immediately resulted in a meteoric rise in the company’s stock price. Day traders are known to target Apple at the release of each of its products, but the quick riches that they seek are all too often a mirage that swiftly disappears.

On the other hand, each product had a noticeably positive effect on the stock over a longer period of time. The overarching, long-term view is the one to properly frame your investment decisions on, not day-to-day volatility. Over time, the market mechanism will identify true value in the marketplace. Rely on the wisdom of the masses over the long term, not on the speculators that routinely come and go, thereby letting companies like Apple work for you.