Apple's big day approaches

Will all the rumors of a new tablet prove true? And what will that do to the company's stock?

By Kim Peterson Jan 26, 2010 2:18PM
The joyous day is almost here -- and by joyous day I mean the day that finally ends the relentless stream of rumors about Apple (AAPL) and its mysterious tablet.

Tech types have talked about nothing else for months. Apple is making an announcement Wednesday morning, and although the company hasn't confirmed anything, all bets are on the unveiling of a new tablet computer.

Some have joked that tablets haven't received this much attention since the Ten Commandments. We've seen fake pictures, lists of what the tablet will have or won't have and a list of victims the tablet will annihilate (Amazon's Kindle being at the top.)

Investors are anxiously watching to see how Apple's stock handles the news, and I have a prediction. In the short term, we'll see the classic AAPL "buy on hype, sell on news" behavior.

Apple shares are soaring Tuesday, up 5% at midday and approaching their 52-week high of $215.59. Its strong earnings report Monday has a lot to do with that, but tablet hype is definitely lifting the stock as well.

Expectations for the tablet are so high right now that there is bound to be some disappointment. It might have built-in 3G networking. It might cost less than $1,000. It might project video onto your living room TV. It might have an extraordinary battery life.

Or it might not.

Apple hasn't had the best track record with version 1.0. Nor should it. You need to start somewhere, and Apple keeps improving on its products until they outperform everything else.

So we could see a drop in the share price Wednesday as hopes are dashed. But permit me some degree of hype here on the long run. A snappy, well-designed and affordable tablet could be huge. And it could well become a major product family for Apple.

Apple chief executive Steve Jobs has often talked about the company as a three-legged stool of products: the iPod, the iPhone and the Mac. But one of those legs, the iPod, is fading fast. A tablet line could take its place.

One of the most knowledgeable Apple analysts, Gene Munster of Piper Jaffray, thinks the company could sell about 1.4 million tablets this year if it ships in March. If the tablet runs for about $600 on average, Munster says, it could boost Apple's revenue by 2%.

Has the tablet's potential already been priced into Apple shares? Analysts have recently raised their target prices on Apple to the $260 to $280 range.

There's a nontablet rumor that's also exciting some Apple users. Some are speculating that Apple will announce Wednesday that it's ending its exclusive contract with AT&T (T) as the iPhone's U.S. carrier. That would be welcome news for those who bash AT&T's networking and connectivity issues.
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