$AAPL Jumps 2.4% on iPad mini Media Event Expectations

Shares of Apple Inc. jumped 2.37 percent on Tuesday as investors reacted positively to the news that the company will hold a media event on October 23rd. Everyone and their brother expects the company to announce a 7.x-inch iPad that the tech world has dubbed the iPad mini.

AAPL ended the day at US$649.793 per share, a gain of $15.033 (+2.37 percent), on moderate volume of 19.86 million shares trading hands. That boosted the Apple's market cap back above the $600 billion mark to $609.1 billion.

The chart below shows Tuesday's trading action, and the uptick when news of Apple's media event invitations hit,

AAPL Chart

AAPL Chart for October 16th, 2012
Source: Yahoo! Finance


Tuesday's gains took place despite a couple of headwinds. For one thing, several analysts cut their iPhone 5 estimates for the September quarter based on supply constraint concerns. We should note that the new estimates of 25million units to 29.5 million units are now more in line with estimates from analysts like Sterne Agee's Shaw Wu, who has been at 27 million units since the middle of September. Barclays Research's Ben Reitzes was already estimating a much more conservative 23.4 million units.

That could be why investors paid no heed to the new numbers from the other analysts.

A Surface Consideration

Other news came out of Redmond, where Microsoft announced pricing and availability for its Surface for Windows RT tablets. The company is positioning its entry-level iPad competitor at the same starting price as Apple, $499, but that will get you 32GB of storage instead of 16GB.

On the other hand, the Surface RT has a much lower screen resolution of Apple's new iPad—which is also expected to get a modest form factor boost during the iPad mini media event. The Surface RT offers a resolution of 1366 x 768, compared to the iPad's 2048 x 1536, making the price comparison less clear.

Shares of Microsoft actually lost ground on Tuesday, ending the day with a slight loss at $29.49, off by $0.02 (-0.07 percent), on strong volume of 47.7 million shares trading hands.

Wells Fargo's Maynard Um cast a cautious note on Microsoft's announcement. In a research note to clients obtained by The Mac Observer, Mr. Um said that pricing on the Surface RT was "partner friendly," making it a little less expensive than a comparable iPad.

"We note that historically a lower price point does not necessarily drive increased demand," Mr. Um said about Microsoft's pricing. "We believe users would want the product to be better and give them increased functionality than they can get on an iPad."

He added, "If the WinRT’s functionality is limited, we believe we could experience another netbook phenomenon where people purchase the device but realize reduced functionality limits it as a true replacement."

Market Rally

There was one more factor contributing to Apple's gains on Tuesday, and that was a general market rally. All three major indices showed gains in the 1 percent range, with the tech-heavy NASDAQ gaining 1.21 percent.

*In the interest of full disclosure, the author holds a tiny, almost insignificant share in AAPL stock that was not an influence in the creation of this article.