How to Tell When It's Time to Sell Apple Stock
byJul 25th 2012 12:21PM
By Quentin Fottrell
With Apple (AAPL) up a whopping 50% this year, is it time to sell some shares? One surprising place to find some guidance, say analysts: the resale market for iPhones.
The iPhone is Apple's best-selling product, in part because it's easy and inexpensive for customer to sell their old ones for new models. Here's how it works: The retail price of a new iPhone starts at $600, but most customers pay wireless carriers a subsidized price of just $199 in exchange for a two-year contract. Since demand for used phones remains high here and abroad, resale sites such as eBay and Gazelle.com offer customers upwards of $200 for their older models – enough to get a new one for free. Gazelle, for instance, currently offers $277 for an 16 gb iPhone 4S in good condition.
"This makes Apple unique among electronic companies," says Yung Trang, president of TechBargains.com. "If it's cheaper to upgrade, why wouldn't I? It's a no-brainer."
That said, if this resale market were to dry up, iPhone sales – and Apple shares – are likely to drop, analysts say. Why might that happen? Wireless carriers may eventually stop selling iPhones for one-third of their retail price, says Morningstar analyst Michael Holt. "When more customers become indifferent about the iPhone and rival phones, wireless carriers will have more power against Apple," Holt says, meaning they will no longer need to offer Apple subsidies to sell its phones. (Verizon Wireless and AT&T declined to comment.)
More from SmartMoney:
- Did Apple Tame the Salesman?
- Apple v. Samsung: The Patent Trial of the Century
- Are iPhones Losing Their Cool?