This year will be an interesting one for Apple Inc. (NASDAQ:AAPL). But full disclosure, I say this with anxiety, not eagerness. Throughout most of the last two decades, Apple stock was a no-brainer. But currently, the evidence indicates that AAPL is losing its magic touch. Continuing to risk exposure to this once-indomitable consumer tech firm could be a big mistake.
Of course, casting doubts on Apple stock is nothing new.
Since the loss of the irreplaceable Steve Jobs, both market analysts and the general public have wondered how Apple would carry on. Many argue that current CEO Tim Cook has done an admirable job, considering the circumstances. I’m not about to disagree. However, I can’t help but notice that the company is merely rehashing old ideas.
The flagship iPhone X is a prime example. Again, another disclosure: I recently purchased the much-hyped smartphone. Not only that, I’m writing a good chunk of this article on my X. It’s an incredibly useful device. Unfortunately, it’s not all that different from competing devices from Samsung Electronic Co Ltd (OTCMKTS:SSNLF).
For me, the switch to the X made perfect sense. I was several generations behind the curve, so the improvements were dramatic. But the same cannot be said about switching from last year’s model. Moreover, my X is hardly physically distinguishable from the litany of competitors. That’s not what you want to hear if you’re holding onto Apple stock.
Although I’m sharing my personal views, you don’t have to take my opinions as gospel. The much-anticipated super-cycle of phone upgrades hasn’t panned out. Worse yet, current sales reports and analyst estimates indicate the situation may not improve markedly.
Apple Losing on Innovation and Operation
Unlike your typical “hit piece,” I have no interest in bashing Apple stock. As I mentioned, I love their products, and particularly, their product ecosystem. It’s something that Sony Corp (ADR) (NYSE:SNE) attempted when I was working there, but to mixed results. AAPL stands alone in that regard.
But recently, this advantage is losing its luster. If the X isn’t getting the job done like its predecessors did during their initial launches, it suggests smartphone market saturation.
As each new product is introduced, it has an increasingly lower impact. Companies have to invest more to stand out. Eventually, the situation devolves into a pricing war: great for consumers but not so for Apple.
Several years ago, AAPL could get away with pumping out whatever they pleased; folks would still clamor to buy their latest offerings. Obviously, they didn’t have to resort to selling a mediocre product thanks to Jobs’ genius. Still, the option was available.
Today, that option no longer exists, but the cause isn’t just related to shifting consumer habits. As InvestorPlace writer Tom Taulli expertly explains, AAPL now has an execution problem.
The company suffered an unusual bout of product and service delays, which included the iPhone X, Apple Pay Cash and AirPods. Perhaps such inconveniences could be overlooked in the Jobs era, but certainly not now.
Worse yet, these delays will have a worrying impact on Apple stock. Taulli writes:
“In the meantime, Amazon.com, Inc. (NASDAQ:AMZN) and Alphabet Inc (NASDAQ:GOOG,NASDAQ:GOOGL) have wasted little time in capitalizing on this. Consider that the smartspeakers from these companies have been selling like hotcakes. As a result, AMZN and GOOGL are quickly becoming the dominant players in this important market category.”
Apple Stock Is Consolidating for a Reason
For would-be buyers, the biggest concern is the lack of momentum for Apple stock. Since early November of last year, AAPL has traded in a tight sideways consolidation pattern. Folks who speculated on the X super-cycle are obviously frustrated.
They might want to brace themselves. We’ve seen similar consolidation patterns last year, first, in May, then later in August. Both times, shares corrected sharply before eventually climbing back up. But since this current consolidation is significantly longer, does this entail a sharper correction?
I can’t say for sure, but the possibility is enough to keep me on the sidelines.
Finally, I’m not sure if Apple has the verve to justify being the world’s first trillion-dollar company. Since dominating the smart-device sector, the company now faces a crossroads. From what we’re seeing, I don’t have the greatest confidence in Apple stock.
As of this writing, Josh Enomoto is long SNE.