Why The Cuts at AAPL Stock May Not Mean Anything
So on the one hand, the production cuts and declining revenues at Apple could signal trouble for AAPL stock.
On the other, it could mean absolutely nothing.
For one thing, AAPL isn’t alone in the seeing lower revenues thanks in part to customers keep their phones for longer. It’s a common trend across the entire industry. According to tech research company IDC, global smartphone shipments in 2016 were barely higher than 2015’s levels. The key for Apple is that its phones still are the number one selling brand in the world. So even though the overall pie is getting smaller, Apple’s piece is still the biggest.
Secondly, the production cuts could just mean that Apple is gearing up for the long-awaited iPhone 8 release. The truth is, when looking at its history, there have been several iPhone models that could be considered “throw-aways.” These bridges and fillers are needed until AAPL can design the tech that it wants to for a new feature. But you have to give the people something. That was especially important when upgrading smartphones took place at faster rates.
Given its lack of innovation, the iPhone 7 Series could be thought of like that bridge line of phones.
You can speculate all you want, but there’s a good chance that the iPhone 8 will be packed with new features — perhaps even more so considering that this year is the 10th anniversary of the iPhone. I’d be willing to bet that AAPL has something special up its sleeve.
And finally, the production cuts and dropping revenues are meaningless because of the more $200 billion in cash on its balance sheet. That sheer amount of cash means that AAPL can “kick the can” for a long while before it must act. It has the luxury of being able to try out different ideas and see if they stick.
That wasn’t the case for NOK, Motorola and BBRY, which had some serious debts to deal with and a lack of that sort of monster cash pile.
Apple Isn’t Going Anywhere
So on the surface, the production cut news could be quite troubling indeed. But the reality of the situation is that Apple will be just fine. The firm is still the reigning king of the smartphone hill and that fact isn’t going away. New product launches should help it keep its lead, and its monster cash balance should give it time to develop those products. Investors in AAPL stock shouldn’t worry about the report from Nikkei.
As of this writing, Aaron Levitt did not hold a position in any of the aforementioned securities.