Yes, Apple Inc. (AAPL) is a massive consumer juggernaut that makes technology cool and accessible to the masses.
But eight years ago, a year after the launch of the first iconic and groundbreaking iPhone, it was still a niche player living off the buzz from its fancy laptops and its cool little MP3 player — the iPod.
That may be a long time in the tech world, but its rise to the largest mega-corporation by market capitalization in the world means that investors and AAPL need to decide whether the company can still live off its hipster image moving forward.
If Apple is to become a more mature industry player, it has to find ways to diversify beyond moving devices from pockets to wrists to backpacks.
What Apple signified to an entire generation of computer and phone users is now being subsumed in the rapidity of iterations in technology. And while many investors continue to whistle past the graveyard regarding AAPL’s future, there are some troubling signs.
Before I get to some of the concerns mentioned in its recent quarterly earnings numbers, I’m not carrying a sign proclaiming “The End Is Nigh” for Apple stock. What I’m saying is, even Apple Inc. is not immune to the forces of the financial markets.
Here are some of the headwinds in Apple’s path right now:
iPhone Growth: The iPhone 6s was not a new generation breakthrough product. It still sold well and Apple is moving into the huge Indian market soon, but the question is, will iPhone 5 and iPhone 6 owners wait for the iPhone 7, or will Apple lose customers to other phone makers? Allowing the competition this opening may be a costly strategic error.
Apple Car: Apple’s car division, Project Titan, has apparently halted hiring for the project because the executives aren’t happy with progress. Most notably Sir Jony Ive, the chief designer for all of AAPL’s iconic devices, is not happy with what the thousand-person team has come up with. That’s not a good sign. Bottom line, the “Apple future” premium looks further off than hoped.
Apple Watch: The Apple Watch 2 is delayed until the second half of 2016. The launch was initially planned for the Spring, but it looks like Apple has decided to significantly revamp the watch with new chipsets and processors. If it has yet to choose its upgrades, even a Fall release may be optimistic. Bottom line, a new Apple Watch isn’t going to help this year’s earnings.
China Slowdown: For now, the Chinese are continuing to buy AAPL products, but if China continues to slow, it will start to effect this piece of the market. That’s especially true now as Chinese smartphone makers are building quality products specifically for the local market that are considerably cheaper. Bottom line, putting all your money down on one product in one market may work, but if it doesn’t, watch out.
The icing on the cake was after CEO Tim Cook talked about how well AAPL has done — record breaking revenues, etc. — he warned that 2016 was going to be a rough year.
The underlying danger with AAPL stock to individual investors is the fact that it is so heavily institutionally owned, representing such a significant proportion of the big averages that if/when they decide they’ve had enough (or they’re actually willing to admit they were wrong), the resulting selloff will crush the unsuspecting little guy.
This is no time to stake a position in Apple stock.
As of this writing, Gregg Early did not hold a position in any of the aforementioned securities.
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