Apple Ends the Year With a Bang

Watch stocks you care about

The single, easiest way to keep track of all the stocks that matter...

Your own personalized stock watchlist!

It's a 100% FREE Motley Fool service...

Click Here Now

The past three and a half months have been full of drama on a daily basis for Apple (Nasdaq: AAPL  ) . Swings anywhere from down 4% to up 7% on no particularly relevant news were par for the course during the final quarter of 2012.

Well, the Mac maker is ending the year with a bang as it rallied over $23, or nearly 5%, on the final trading day of 2012.

AAPL Chart

AAPL data by YCharts

Looking back on the past 12 months, Apple has still handily beat the market, even with the gut-wrenching 25% pullback that investors have had to endure. Shares closed out the year with a 29.5% return.

At the peak, Apple was outpacing the Nasdaq Composite (of which it's by far the largest component) by an incredible 50% and absolutely crushing the S&P 500 and Dow Jones Industrial Average.

AAPL Chart

AAPL data by YCharts

What's driving some of Apple's gains as 2012 winds to a close?

Barron's bull
Over the weekend, Barron's ran an article on Apple's cheap valuation. One of the possible culprits behind Apple's three-month sell-off is the prospect of increased capital gains taxes associated with the fiscal cliff that the country is potentially heading over in a matter of hours. With shares up 70% year to date at the peak in September, it's very likely that investors, individual and institutional alike, were looking to lock in some of those healthy gains at lower rates.

Some have dubbed this the "reverse January Effect," despite the fact that it's difficult to prove or disprove it. If selling in anticipation of a higher tax rate is having a meaningful impact on Apple shares, it won't be a long-lived catalyst, and with it out of the way, Apple's prospects may brighten once more.

Barron's articles have been known to move the market in the past. For example, the publication boldly proclaimed that Facebook (Nasdaq: FB  ) was worth just $15 in September, which sparked a sell-off for the social network the following day. That pessimism was despite the fact that the valuation seemed a bit unscientific at best.

Balancing act
Another reason why things may only get better from here for Apple shareholders is that the iPhone 5 shortages are now a thing of the past. As the latest and greatest device in Apple's most important product family, iPhone 5 supply constraints were the most legitimate concerns facing the company and were very real after the device launched.

The production hurdles stemmed from manufacturing yields on the in-cell touch displays that Apple is using to make the device so thin. Apple "only" sold 5 million units on launch weekend, which disappointed investors, and quoted shipping times on new orders were between three to four weeks for quite a while.

On the last conference call, Tim Cook refrained from saying  whether or not he felt that iPhone 5 supply and demand would balance during the quarter, but it would appear that is now the case as Apple's Online Store now shows all configurations in stock.

Source: Apple.

A number of Wall Street analysts have also offered thoughts on the matter, with the consensus being that the iPhone 5 is catching up with demand.

Apple's land of opportunity
Earlier this month, Apple also launched the iPhone 5 in China with its two official carrier partners, China Unicom (NYSE: CHU  ) and China Telecom (NYSE: CHA  ) , garnering 2 million units on launch weekend. That was the first time Apple had disclosed unit sales figures in China, so it was clearly proud of how many iPhones it moved.

The iPad mini is also off to a strong start in China. Just last week, Topeka Capital Markets analyst Brian White called demand for the device "insatiable." The smaller tablet launched in Hong Kong on Nov. 2 along with the rest of the world, but mainland China didn't get its hands on the device until Dec. 7.

Apple includes both Hong Kong and mainland China in its Greater China geographical segment, where revenues jumped 79% to $23.8 billion in sales last fiscal year. Due to their proximity, some mainland demand is inevitably filled from Hong Kong as iDevice smuggling is a profitable and popular endeavor.

Source: Earnings conference calls.

Apple's sales in Greater China have grown from approximately $858 million in fiscal 2009 to an incredible $23.8 billion in fiscal 2012, representing a compound annual growth rate of 129% over the past four years.

With Apple's partnership with China Mobile (NYSE: CHL  ) expected to materialize in 2013, there's plenty of reasons to be bullish heading into the New Year.

Apple's pullback is also setting up the company for market-thumping performance in 2013. The Mac maker is seeing incredible momentum in its two market-shaping product families, and The Motley Fool has now included two bonus reports specifically tailored to those devices in our new research service on Apple. Get it all by clicking here.


Read/Post Comments (0) | Recommend This Article (1)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

Be the first one to comment on this article.

Compare Brokers

Fool Disclosure

Sponsored Links

Leaked: Apple's Next Smart Device
(Warning, it may shock you)
The secret is out... experts are predicting 458 million of these types of devices will be sold per year. 1 hyper-growth company stands to rake in maximum profit - and it's NOT Apple. Show me Apple's new smart gizmo!

DocumentId: 2173919, ~/Articles/ArticleHandler.aspx, 10/20/2016 5:43:28 PM

Report This Comment

Use this area to report a comment that you believe is in violation of the community guidelines. Our team will review the entry and take any appropriate action.

Sending report...

Today's Market

updated Moments ago Sponsored by:
DOW 18,162.35 -40.27 -0.22%
S&P 500 2,141.34 -2.95 -0.14%
NASD 5,241.83 -4.58 -0.09%

Create My Watchlist

Go to My Watchlist

You don't seem to be following any stocks yet!

Better investing starts with a watchlist. Now you can create a personalized watchlist and get immediate access to the personalized information you need to make successful investing decisions.

Data delayed up to 5 minutes

Related Tickers

10/20/2016 4:00 PM
AAPL $117.06 Down -0.06 -0.05%
Apple CAPS Rating: ****
CHA $53.30 Down -0.04 -0.07%
China Telecom CAPS Rating: **
CHL $59.22 Down -0.85 -1.42%
China Mobile CAPS Rating: ****
CHU $12.14 Down -0.11 -0.90%
China Unicom CAPS Rating: **
FB $130.00 Down -0.11 -0.08%
Facebook CAPS Rating: ***