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Apple: Is the Rebound Real?

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Investors will need a blockbuster iPhone release this summer if this revived romance is going to survive.

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In the past two weeks, we've seen a bit of a turnaround for Apple (NASDAQ:AAPL), the world's most closely watched technology company.

The stock has jumped from its April 19 low of $385 by 15%, possibly signaling a rosier outlook for the company -- or at the very least, a reprieve from the endless negativity seen heading into its April 23 earnings report. which was pretty decent.

One simple but effective illustration of said negativity comes in the following chart, which plots Apple's stock price vs. the average analyst target price:


Click to enlarge

At the start of the year, the average target price was at $735. It hit $540 on April 22, the day before earnings, and stands at $533 now.

And on a different note, Apple pulled off the largest corporate bond offering in history on Tuesday, selling $17 billion in bonds to aggressive buyers.

In terms of maturity, Apple's bonds go out as far as 30 years, and the high demand for them pushed yields down to fairly low levels.

So if people are not demanding significant compensation for the risk of owning Apple bonds, what does that say about perception of Apple?

In a word, confidence -- despite the fact that, as many others have pointed out, the mobile device industry has historically been the land of booms and busts.

If you want to see some volatility, think about Motorola's adventure over the past 10 years.

From 2004 to 2006, Motorola's fortunes improved in a huge way with the uniquely ultra-thin RAZR mobile phone. I remember when people were paying $500 for those bad boys!

Then in 2007, when the iPhone hit and Motorola didn't have a solid follow-up to the RAZR, it was game over... until 2009. Motorola got right back in the saddle toward the end of that year, launching the original Droid, the smartphone that put Google (NASDAQ:GOOG) Android on the map.

Motorola hung in there for a while before succumbing to Samsung's wildly successful Galaxy smartphone line. (See: Motorola Results Point to Apple, Samsung Dominance.)

And what's happening in 2013? Motorola device sales are flat-out collapsing, with a 54% year-over-year decline in revenues in the first quarter of 2013.

The ups and downs aren't unique to Motorola. Just look at HTC (TPE:2498), BlackBerry (NASDAQ:BBRY), Nokia (NYSE:NOK), Palm, and Microsoft (NASDAQ:MSFT), who have all had periods of joy and misery throughout their histories.

So it's obvious that it's pretty common for device companies to go from hero to zero rather quickly.

Time will tell whether the resurgent confidence in Apple makes sense.

In Apple's favor, within the history of the modern smartphone industry, its streak of success with the iPhone is only rivaled by BlackBerry's astounding run from 2002 to 2008, when it was still under the Research In Motion name.

Plus, Samsung's highly-anticipated Galaxy S4, the follow-up to the blockbuster S3 and the iPhone 5's main rival, was widely regarded as a pretty minor upgrade -- a good product, but not a real groundbreaker, and with some so-so software. The Guardian posted a good round-up of the reviews here.

The next clue will come in the form of the next iPhone. If it's not an obvious home run, this new confidence may disappear rather quickly.

However, if (and this is a big if) the iPhone 5s or 6, or whatever it's called, is a stunner on the level of 2010's iPhone 4, I suspect the world will get lovey-dovey with Apple once again in a jiffy.

Twitter: @MichaelComeau

Also see:

What Should Apple Do With Its Cash? Buy BlackBerry

Google Has Destroyed Apple's Walled Garden From Within

If an iPhone Can Be a Cash Register, What Can Google Glass Be?


Disclosure: Minyanville Studios, a division of Minyanville Media, has a business relationship with BlackBerry.

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No positions in stocks mentioned.
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