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Get Ready To Sell Apple On This Date

Tuesday, September 9, 2014 is a day that Apple, Inc. (Nasdaq: AAPL) CEO Tim Cook has been anticipating for a very long time. Though he took the reins from Steve Jobs nearly three years ago, Apple’s product rollout plans have been a bit underwhelming ever since.

As Laurence Balter, a leading technology analyst, told the New York Times in June, “all we hear from Cook is there are some great products coming down the pike.”

Yet, at Apple’s much-hyped new product event slated for Tuesday, Balter and others will likely be silenced. Signs are pointing to a blockbuster roll-out, led by a much-improved iPhone and perhaps a long-awaited smartwatch. Expectations are also running high that Apple will share its view of the Internet of Things, which envisions Apple hardware and software powering a wide range of household devices.

Analysts at Oppenheimer speak for many with their view of the iPhone 6: “We feel comfortable predicting that iPhone 6 will be the best iPhone to date, with its larger displays, sharper and faster camera, more convenient and intuitive interfaces, more acute contextual awareness, and expanding soft suite and application platforms.”

Clearly, investors are already frothing: Since late April, shares have surged 35%, adding $160 billion to the company’s market value.

Yet even the most enthusiastic Apple bulls can’t ignore history. Looking back over recent quarters, Apple’s stock has been hit by profit-taking after such major events.

[More from StreetAuthority.com: ]

Products Released

Date

One-Day Gain/Loss

One-Month Gain/Loss

iPhone 5C, iPhone 5S

9/10/13

-5.4%

-1.0%

iOS7, new MacBook Pro, new MacBook Air

6/10/13

-0.6%

-4.8%

iPad Mini, new iPad, new iMac

10/23/12

0.5%

-6.4%

iPhone 5, new iPod Touch

9/12/12

1.5%

-6.0%

Beyond short-term trading issues, investors need to know that shares of Apple have a history of surging, followed by profit-taking. Shares rallied sharply in early 2012, before pulling back nearly 20%.

That spring time swoon wasn’t due to a reduction in sales and profit forecasts. Instead, it was simply the result of a broad realization that shares had come too far too fast. As this article from CNBC noted, at the time, a great deal of euphoria had been priced into the stock.

Will this time be different? Only if Apple’s new product launches lead analysts to sharply boost their growth forecasts.

[More from StreetAuthority.com: ]

Andy Hargreaves, analyst at Pacific Crest, has his doubts. He thinks the new iPhone will be well-received but not a blockbuster in light of heightened competition, and he’s unsure if wearables and a payment platform -- two new categories for Apple -- will move the needle. “Based on the work we have done, we do not expect either new segment to drive incremental profits that are meaningful at Apple’s scale in the near to medium term,” he said.

In fact, Hargreaves has already hinted that a ratings change may be coming: He figures that Apple’s new product launches must “generate billions of dollars of incremental operating profit. We will be looking for this type of potential at the Sept. 9 event, but are likely to downgrade AAPL if we do not see it.”

While some bullish investors ponder scenarios for further upside for Apple, it is also wise to think about any scenarios that may push shares much lower. A key concern: will cell phone carriers continue to show a desire to heavily-subsidize iPhones to lock customers into long-term pricey cell phone contracts? As I recently noted, that industry is moving towards much more transparent pricing schemes, as carriers look to offer lower-priced plans without hardware sweeteners. An unsubsidized iPhone is a hard purchase to justify for many.

Another concern: the iPad/tablet category is showing signs of cooling as some consumers shift back towards traditional computers. Even a shift from iPads back to Apple’s own MacBooks would portend a drop in profit margins. The latest iPads carry gross margins in the 45-60% range which is well above the company’s 38% company-wide gross margin, according to this article.

[More from StreetAuthority.com: ]

Risks to Consider: As an upside risk, Apple could deliver even more new product groups than are currently anticipated at the September 9 event.

Action to Take--> Apple has a powerful base of investor support, so a sharp sell-off on September 9 is unlikely. Indeed shares may rally to fresh all-time highs that day, which is why you should hang on until then.

But in light all of the euphoria surrounding this event, moderate profit-taking appears to be a realistic scenario in subsequent trading sessions. Longer-term, there are greater reasons for concern. Apple’s existing core products such as the iPhone and iPad are now fairly mature and consumers may feel less inclined to keep upgrading models every year. That’s why the new categories are so important. Trouble is, we have no way of knowing if they will spur major new market niches. The iWatch, for example, while quite cool, is somewhat redundant in terms of features of an iPhone, and consumers may not feel the need to own both items. If you’ve been an Apple bull for many years, know that the company’s $620 billion market value is 300% higher than it was five years ago. Simply put, Apple is already expected to deliver greatness in coming quarters, and can ill afford to disappoint investors.

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