Here's how to read IDC's Apple forecast

Yes, the researcher says that the company will lose share in the tablet market. But that market is expected to see explosive growth.

By Jim J. Jubak Dec 5, 2012 5:29PM
Credit: 2012 Apple Inc
Caption: iPadMiniShares of Apple (AAPL) sold off by 6.43% Wednesday to close down $37.05 to $538.79. Why?

Well, Apple is one of those stocks that is so widely held as part of so many strategies that it is quite capable of sinking or soaring on internal market dynamics. (In other words, there might not be a "real world" reason beyond traders doing what some computer has told them would make money.)

But there is a piece of news out Wednesday which might be the cause of the drop in the stock’s price. If that news is actual cause of the drop, the interpretation of that news is startlingly wrong. Boneheaded. Innumerate.

See what you think. (Apple is a member of my Jubak’s Picks portfolio.)

Here's the news item: Technology market researcher IDC projected Wednesday that by 2016 the tablet market would reach annual sales of 283 million units by 2016. That’s huge growth from the company’s projection of 122 million units in 2012. And it represents an 8.1% increase in IDC’s earlier forecast.

You’d think that would be good for Apple, the market share leader in tablets.

Except that IDC also projects that Apple will lose share in the tablet market from now through 2016. Apple’s share of the tablet market, IDC projects, will fall to 49.7% in 2016 from -- ready for the bad news? -- 56.3% in 2011 and from a projected 53.8% in 2012. Google (GOOG), meanwhile, will see its share increase to 42.7% in 2012 from 39.8% in 2011. By 2016 Google will drop back, however, to a 39.7% share of the market.

Let’s leave aside the issue of whether IDC or anyone else can really predict market share down to one-decimal place for 2016 and do a few calculations with these numbers.

Here’s the bad news for Apple: The company will sell a projected 66 million iPads and iPad minis in 2012 when it holds a 53.8% market share. In 2016 when Apple’s share is projected to have dropped to 49.7%, the company will sell 141 million units.

Yes, the terrible news is that because the tablet market is forecast to grow to annual sales of 283 million units in 2016 from 122 million in 2012, Apple’s slightly smaller market share (49.7% from 53.8%) results in growth from 66 million units sold in 2012 to 141 million in 2016.

Yep, I see exactly why financial markets decided to sell Apple lower Wednesday.

Some traders would probably argue that Wednesday’s projections on market share represent a cut in expectations for Apple’s market share and tablet sales. That would make sense of me if Apple were a high-flying technology momentum rocket that traded at 60 times earnings. But Apple’s trailing-12-month price-to-earnings ratio is just 12.43. That’s only 80% or so of the price-to-earnings ratio for the average Standard & Poor’s 500 stock.

If I could convince the market to grant me a wish, it would be that traders sell Apple back down to the $525 or so the stock hit on Nov. 14. I’d be happy to buy at that price -- again -- and then sell two weeks later at the $589 or so the stock hit on Nov. 26. In fact I’d be happy to do that over and over again.

So go ahead and sell. Give me my wish. Make my day.

Jim JubakAt the time of this writing, Jim Jubak didn't own shares of any companies mentioned in this post in personal portfolios. The mutual fund he manages, Jubak Global Equity Fund (JUBAX), may or may not own positions in any stock mentioned. The fund did own shares of Apple as of the end of September. For a full list of the stocks in the fund as of the end of the most recent quarter, see the fund's portfolio here. 

Dec 5, 2012 8:06PM
I really think it is AAPL is oversold and if it goes lower, I am buying more of a stock where I am already heavily committed.  The PE ratio is good, they are sitting on cash, and they are viewed as one of the top luxury tech companies.  Forget the iTunes store, forget that Microsoft Surface is less than stellar, and forget increasing brand loyalty in the USA - all strong positives for AAPL, the developing world is extremely brand conscious - buying up labeled clothing, handbags, and yes technology as a status symbol.  Over 100,000 orders for the iPhone 5 were placed on the first day available in China. 
Our markets are a sad place where computerized trading and short term hedging is causing fluctuations that were unheard of 20 years ago.  The idea that the exchanges were used to raise capital for industry is almost forgotten. 

Dec 6, 2012 8:17AM
i am long aapl for years, i pray aapl buys back as many shares as possible, and sends the shorts to hell..........
Dec 6, 2012 4:19PM
APPLE needs a new product or they will simply repeat the history of the Apple Computer when the PC Came to town and killed their sales based on price.

Being an expensive luxury brand is great on one hand, solid high margins, but on the other hand it means limited growth in the face of competition building cheaper products for the masses.
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