Apple Stock News: How External Factors Affect Apple

How External Factors Affect Apple

Analysts expect Apple’s final quarter of 2014 to set dramatic records in iPhone sales and overall profits. While the iPhone 6 and iPhone 6 Plus have undoubtedly been a success, other factors that are not under Apple’s control have also have an effect on Apple’s sales and profits. The most direct of these market factors is the lack of competition from Samsung and other smartphone makers. Apple’s main competitor is Samsung, but they have had poor reception to both of their flagship launches in 2014. Samsung’s newest products used cheap materials and were dinged by reviews, and the new iPhone models have bludgeoned sales of the Galaxy S5 and Note 3, which used to be differentiated by their large screens. All of this led to a 73.9% decline in phone profits for Samsung in the third quarter. No other smartphone maker has come close to approaching Apple’s market share, and they are even dominating the smart phone markets in Japan and China.

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Falling oil prices have also had a positive impact on Apple’s profits for the final quarter. Oil prices have drastically fallen in the last few months due to lagging demand growth and a world surplus of supply largely due to U.S. fracking growth. More recently, OPEC decided not to curb their supply. Maintaining their output has overwhelmed global demand for oil, pushing crude oil prices downward in an attempt to make U.S. production costs prohibitive. They hope this will reduce new investment in fracking, allowing the oil cartel to win back market share.

The result of all this is that oil prices have lost 40% of their value, which directly and indirectly benefits Apple. Lower oil prices significantly reduces the cost of shipping components and finished goods. Reduced oil prices also help Apple indirectly, as low gas prices also give consumers extra cash to spend elsewhere. That is especially fortuitous for Apple, as their holiday product lineup has a variety of premium options, such as the iPhone 6 Plus, a $100 for its larger screen. The extra cash consumers have to spend is also key for iPad sales, as Android tablets commonly target the low end of the price market. Apple’s newest iPad 2 is largely seen as the most desirable tablet, and consumers will be more likely to purchase it over cheaper alternatives with extra cash on hand during the holiday quarter..

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