There’s no doubt that over the last decade Apple Inc. (NASDAQ:AAPL) has faced many problems and made many missteps. But, admittedly often to my surprise, Apple has overcome them all with flying colors, and of course AAPL stock has proven to be quite resilient over the years.
Past problems have included poor call reception of the early iPhones, the overheating problem of iPhone 3GS, the company’s ill-fated maps project, its general lack of innovation, and being outsold by Android. But Apple has somehow nonetheless managed to maintain its sterling reputation and huge profits, and AAPL stock has continued to rally.
But for a multitude of reasons, it really does feel like Apple is poised to enter a different era. It seems like a combination of several factors could cause the AAPL stock price to take a big hit over the next three to six months.
First and foremost, we have the throttling issue. I’d argue that Apple was never really one of the more caring, compassionate companies around (see, for example, Steve Jobs’ denial of the reception issue, the company’s effort to dump Google Maps in favor of its own vastly subpar offering, the slave-like treatment of the Chinese workers who make its products, and the sky-high cost of its chargers).
Yet aided by a mostly silent/adoring media and the zombie-like devotion of its hundreds of millions of fans who have adored its design and ecosystem, Apple managed to shake off all these potentially crippling problems.
The throttling scandal, however, seems very different and more potent. For the first time, it’s pretty clear that Apple, despite its denials, put profits ahead of its customers’ welfare. Even Apple fans are more or less saying that, and the company is going to face at least two class-action lawsuits that the media will have to cover, at least for a little while.
Moreover, the scandal comes at a time when there were already many complaints about the high price and unwieldy design of the iPhone X. The fact that Apple put Jony Ive back in charge of iPhone design after a two-year hiatus suggests that dissatisfaction with the iPhone X’s design was becoming a real problem for the folks at Cupertino.
And while in the past, Android was Apple’s only really tough foe when it came to competing for consumer technology dollars, that’s really not the case anymore.
The Amazon.com, Inc. (NASDAQ:AMZN) digital assistant, Alexa, is getting quite popular, and many consumers are spending significant money on wearables, where Apple Watch is just one choice among many and doesn’t quite have the brand power of the iPhone. Tech fans are also spending some money on drones, and virtual reality products seem to be gaining some momentum.
I’m not saying that there will be a massive switch from iPhone to Android anytime soon. But I think many more iPhone owners, disgusted by the throttling scandal and eager to spend their money on other tech gadgets, will hold onto their older iPhone models for a longer time.
Meanwhile, it looks like Apple is going to have to curtail its throttling scheme, making it easier for more consumers to hold off on buying the latest iPhone models.
Bottom Line on AAPL Stock
Analysts’ estimates indicate that disenchantment with the iPhone X may already have taken a meaningful toll on Apple. In the wake of the throttling scandal, it looks like there will be more pain ahead. Investors should take their profits on AAPL stock to avoid what looks to be tough sledding ahead for the tech giant and its shares.
As of this writing, Larry Ramer did not own any shares of the securities named above.