Hot Off The Wire – 11 September 2013

APPLE INC.’S (NASDAQ: AAPL) SHARES fell by 2.3% to 494.64 following its much-awaited event at Cupertino, California. At the event, Apple introduced its new flagship iPhone 5S, a new budget smartphone – the iPhone 5C, and the iOS 7, which is the latest OS that is likely to be released on September 18. Shares fell primarily since markets were disappointed over the pricing of the iPhone 5C, together with Apple’s silence about its much-anticipated deal with China Mobile, the world’s largest mobile carrier in China. But as we go to press, we have just received word that Apple has now secured the final license necessary for its iPhone to operate on China Mobile Ltd.’s mobile network. This will now pave the path for Apple’s entry into China Mobile’s 700-million customer base, which will of course be a game changer in the market.

We expect Apple’s stock to shoot up on this news.

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The iPhone 5C is likely to be available in 5 colors, and in a plastic case with some features of the iPhone 5. The starting price of the iPhone 5C will be $99 on contract and it will also be available for sale at $549 without a contract. The pricing is much higher than initially expected; Apple was expected to target the low-end smartphone market with a price range of $300 to $400.

The iPhone 5S, priced at $199 on contract, is likely to be available in 3 color variants with a faster processor and an improved camera and fingerprint scanner that will unlock the phone by touch alone. It will have a dedicated M7 Motion co-processor chip, which is likely to continuously track motion data without heavily draining the battery.

The launch of iOS7 went according to expectations. The improvements are incremental; the new iOS introduces thin typography and more vibrant colors.

With the new launches, market concerns over Apple’s margin has reduced but the mid-range iPhone 5C is not likely to boost sales volume. It looks like Apple is clearly not going after the very low-end of the market.

Apple’s stock looks bearish for the short-term with disappointment over news releases and more than 11% gain in the last month. Since Apple has now secured the final license necessary for its iPhone to operate on China Mobile Ltd.’s mobile network, we expect Apple’s stock to shoot up as market responds to this much-anticipated announcement.

WSA still hold a long-term bullish view on stock and advice is to buy it at correction with a price target of 549. WSA expects APPLE EPS TO REMAIN A LITTLE LOWER than our earlier forecast on account of lower sales volume.

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