$AAPL, $CHL, Apple Moves To Take The Company To The Next Level

Posted by: : Paul EbelingPosted on: December 12, 2013 $AAPL, $CHL, Apple Moves To Take The Company To The Next Level

$AAPL, $CHL,  Apple Moves To Take The Company To The Next Level

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Last Thursday, Apple Inc. (NASDAQ:AAPL) revealed its worst-kept “Secret” when it reported it would align with China Mobile Limited  (NYSE:CHL) to market its products into China, a very lucrative market for the smartphone giant.

The deal was not a surprise to the markets, the stock edged up about 3% on the news.

People have asked me why the stock market shrugged off the news, given that China Mobile is the biggest mobile deliverer in the world, with about 730-M subscribers.

That subscriber base make for a huge number of potential buyers and added revenue channels for Apple.

But, the deal alone does not mean Apple is going right back to its prior high above $700.00, reached in September 2012. The reality is that Apple needs to be able to find Chinese buyers for its expensive or overpriced Smartphones and tablets.

The  market is there, and it’s probably closer to about 300-M people or so, based on the number of middle-class consumers in China.

The reason Apple’s potential market base being much smaller than China Mobile’s subscriber base is due to the company’s product pricing.

It is not likely that a shopkeeper or farmer in rural China is going to pay a major portion of their annual wage for an “iPhone 5C” or “5S.”

This is a Key issue that Apple is facing in this market, most of Chinese consumers earning average wages.

If China Mobile decides to subsidize the iPhones for buyers, as we have seen recently, with the Zero-cost 5C with the signing of a contract, it could cut the cost of an iPhone 5C at around $190.00. And it really not a big deal for China Mobile to subsidize its phones, given that the majority of the company’s revenues are made from its monthly mobile fees.

So for Apple really to really drive into China and increase its market share from its current 5% or so, the company’s success will depend exclusively on the price point of its phones to the Chinese consumer.

Apple has traditionally made money from selling its phones, so if the company were to make these major price cuts in China, it would be a divergence from its normal policy.

If Apple wants to be the next Samsung Electronics Co. Ltd. (PINK:SSNLF), LG Corporation, HTC Corporation, or Nokia Corporation (NYSE:NOK) in China and the emerging markets, aggressive pricing will be required for it to succeed and reward investors IMO.

HeffX-LTN Analysis for AAPL: Overall Short Intermediate Long
Bullish (0.32) Neutral (0.12) Bullish (0.44) Bullish (0.42)

Stay tuned…

HeffX-LTN

Paul Ebeling

 

 

 

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Paul Ebeling

Pattern Recognition Analyst, equities, commodities, forex
Paul Ebeling is best known for his work as writer and publisher of “The Red Roadmaster’s Technical Report” on the US Major Market Indices™, a highly-regarded, weekly financial market letter, where he enjoys an international audience among opinion makers, business leaders, and respected organizations. Something of a pioneer in online stock market and commodities discussion and analysis, Ebeling has been online since 1994. He has studied and worked in the global financial and stock markets since 1984.
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