Few stocks trade on emotion the way Apple Inc. does. Its rip-roaring initial public offering in 1980 created the template for modern tech mania, while making Steve Jobs a gazillionaire. When the company fell on hard times in the mid-1990s, no amount of good news could pierce the cloud of doom hanging over investors. Now, with the launch of the hugely hyped iPhone in a few weeks, momentum investors are driving Apple (AAPL) shares to unexplored territory. The stock has doubled in the past year, to 122. Apple’s market cap recently topped $100 billion for the first time.
Hard as it is to believe, all the excitement surrounding Jobs and his new toy may actually understate the impact of this device on Apple’s fortunes. Beyond the hysteria surrounding its June 29 launch, the iPhone has the potential for adding a totally new, $10 billion-a-year business within just a few years. If Apple can expand so-called smartphones from a luxury carried by corporate road warriors into an everyday tool for the masses—combining the functions of a BlackBerry and an iPod—Apple could soon see a new growth tear.
If Apple’s goal of selling 10 million iPhones by the end of 2008 seemed ambitious to some back in January when Jobs first unwrapped his new baby, few doubt it now. Wall Street speculation has gone from how much market share it can steal, to how much it can expand the overall smartphone market, based on Apple’s entry and the competitive response it will elicit from incumbents such as Nokia (NOK), Palm (PALM), and Research In Motion (RIMM).
Source: BusinessWeek