Apple Inc. Stock Stability Is Threatened by Constant Product Delays


AAPL stock - Apple Inc. Stock Stability Is Threatened by Constant Product Delays

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Apple Inc. (NASDAQ:AAPL) CEO Tim Cook is known for his logistics and supply-chain management skills. They have certainly been instrumental in the company’s spectacular success. Lately things have been slipping, though, and if the problems continue there could be an adverse impact on the AAPL stock price.

The most recent issue is the delay of the HomePod, which is the in-home smart speaker. APPL initially announced that the launch would be on Dec. 1 but unfortunately, this proved too optimistic. Now the company has indicated that the device will not hit the markets early next year.

But the HomePod delay is not the only example. Consider the following delays:

  • The iPhone X has suffered from production problems and launched six weeks later than would be the case for a typical new AAPL device.
  • In mid-September, Apple Pay Cash was supposed to come out. But it did not, and Apple has not provided a new date.
  • There is still no, Inc. (NASDAQ:AMZN) Prime video mobile app for AAPL’s media player.
  • There was a six week delay for the AirPods.

Now it’s true that such products are extremely complicated, involving cutting-edge technologies. AAPL also focuses on the high-end, which can make production even more challenging.

But the delays are still ominous and really should be taken seriously by holders in AAPL stock. To see why, let’s take a deeper look at the HomePod.

AAPL Production Issues

Back in early June, the company had a splashy announcement for the HomePod, saying it was:

“a breakthrough wireless speaker for the home that delivers amazing audio quality and uses spatial awareness to sense its location in a room and automatically adjust the audio. Designed to work with an Apple Music subscription for access to over 40 million songs, HomePod provides deep knowledge of personal music preferences and tastes and helps users discover new music.”

While this stirred up lots of excitement, there was still a nagging problem. Why did it take AAPL so long to come up with smart speaker? After all, AMZN has been in the market with its Echo speaker since 2014. And a couple years later, Alphabet Inc (NASDAQ:GOOGL) launched its own offering.

Something else: AAPL will miss out on another crucial holiday season because of the delay. For the most part, AMZN and GOOGL will have the advantage of getting more marketshare and also evolving the brand. Such factors are likely to make it even harder for AAPL to capitalize on the opportunity.

According to Global Market Insights, Inc., the smart speaker market category is forecasted to hit $13 billion by 2024, reaching over 100 million units. No doubt, this is the kind of market that can move the needle for AAPL stock.

Bottom Line On AAPL Stock

I continue to be a bull on AAPL stock. The critical driver, of course, is the iPhone, which represents the lion’s share of revenues and profits. All in all, it looks like the latest version is a winner and should help to pump up growth.

There will also be positive impacts on other businesses, especially services. Oh, and AAPL is likely to bolster its revenues in China. In fact, the most recent quarter provided signs that there is already a pick up in growth.

Besides, the valuation on AAPL stock is reasonable, with the forward price-to-earnings ratio at 14X.  By comparison, GOOGL trades at 25X and Facebook Inc (NASDAQ:FB) has a multiple of 27X.

But when looking over the next few years, things could easily change, and for the worse. Basically, Cook needs to refocus on his strengths and make sure that AAPL gets back to a rock-solid approach to production.

And he needs to do this sooner rather than later.

Tom Taulli is the author of High-Profit IPO StrategiesAll About Commodities and All About Short SellingFollow him on Twitter at @ttaulli. As of this writing, he did not hold a position in any of the aforementioned securities.

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