After closing out today at $461 per share, Apple (NASDAQ:AAPL) is now up 10% from its 52-week lows. A big part of that bounce back off its lows was Apple's 5.4% rebound in the two days following Samsung's latest smartphone launch. With Apple finally seeing a rebound after a half-year-long sell-off, could this be the early stages of an Apple rally?
In the following video, senior technology analyst Eric Bleeker looks at Apple's recent mini-rally and examines what's still standing in the way of letting Apple see larger gains. He notes that while investors were relieved that the Galaxy S4 seemed to offer only "evolutionary" updates to the phone, competition with Samsung is just one worry that's been holding Apple's shares back.
Yet while Apple investors can rightfully be anxious about a rally after months of seeing the stock decline, Eric notes that competition with Samsung is just one of several storylines that have been cited for Apple's decline.
- New product launches: Whether fair or unfair -- after all, Apple's track record on products is better than those of the pundits -- there's a perception not so much that Apple's innovation has slowed, but more that its products aren't addressing the growth opportunities in the smartphone market. That is, Samsung's last four Galaxy phones have all featured larger screens. If the Galaxy is Apple's biggest competitor in more expensive smartphones and it's used a larger screen as a key selling point, should Apple be introducing a larger iPhone? Also, with the strongest smartphone growth now in emerging markets, how will Apple address that opportunity? As Eric notes, the Galaxy S3 isn't even one of Samsung's top five selling smartphone models in India. It's all cheaper phones that are getting strong sell-through.
- What to do with its money: We all know the storyline. Apple has $137 billion, and shareholders want more back. Eric believes it's a question of when the company will return the money, not if. Yet until Apple unveils either a buyback plan or an increased dividend -- or a combination of the two -- this will be a powerful anchor on the company's shares.
- Near-term earnings: In the end, the biggest knock on Apple is that expectations around its earnings have been declining for months amid margin concerns. There's no real "near-term" solution to this problem as the next couple of quarters could face difficult comparisons with the year-before quarter. However, a strong close to the year could renew faith in Apple's ability to grow. The belief that Apple can keep growing from today's size is the biggest key to Apple's ability to resume another bull run.
Austin Smith owns shares of Apple. Eric Bleeker, CFA, has no position in any stocks mentioned. The Motley Fool recommends and owns shares of Apple. Try any of our Foolish newsletter services free for 30 days. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.