Apple (NASDAQ:AAPL) CEO Tim Cook certainly used all the right buzz words and enthusiasm-stoking terms at the company’s annual meeting in early March, hoping to convince the owners of Apple stock that the future would be brighter than the recent past has felt. In short, Cook said the tech giant is developing products that will “blow you away,” even if he couldn’t say what those products are.
And maybe those planned innovations truly will be game-changers.
If investors care to be brutally honest with themselves, though, they’ve seen this routine before from AAPL. Each time they see it, the number of adverbs and adjectives ramps up, while the number of subsequent, true innovations is pared down.
The tipping point for the worse was actually reached last year.
Talk Is Cheap
For the record, Apple is “planting the seeds” and “rolling the dice” on some “fantastic” product developments that will “blow you away” as the company follows its “long, great roadmap” for non-iPhone goods, the CEO said.
He went on to explain to Jim Cramer after the company’s annual meeting “We’ve got great innovation in the pipeline for new iPhones that will incent you and other people that have iPhones today to upgrade to new iPhones,” adding “We are going to give you things that you can’t live without that you just don’t know you need today.”
Never let it be said that Cook hasn’t mastered the art of hyperbole.
But the problem is that the hyperbolic outlook is coming across as more than a little bit desperate. It’s not very becoming of the world’s most profitable company.
It’s also rhetoric we’ve heard before from AAPL, even if it was a bit less sappy at the time.
For example: In 2012, Cook promised “more of this kind of innovation,” in reference to what he described as a “beautiful,” then-new Retina Display screen for its handheld wares. In 2016, ahead of the launch of the iPhone 7, he promised iPhone innovation “you can’t live without.”
To be fair, Apple has been the pace-setter in terms of consumer-tech quality. None of its innovations has yielded products we “can’t live without,” though.
More than that, however, each technological evolution seems to gain less ground than the previous one. The process has simply been so gradual that it’s been tough for the owners of Apple stock and iPhone owners to notice.
Apple Stock’s Death by a Thousand Cuts
Again, don’t misread the message. Even with a minority market share, the iPhone has become the yardstick by which all other smartphones are measured.
But that’s just not enough to boost Apple stock anymore.
Some will argue the relevancy of last quarter’s 15% decline in iPhone revenue. And they’d have a fairly valid argument. AAPL is increasingly becoming a digital-services organization, and has major ambitions for its still-small video platform.
Nevertheless, that wasn’t the future Apple had planned just a few years back.
AAPL has stumbled before, but previously no one in the mainstream was willing to entertain the idea that maybe, just maybe, the company couldn’t ride the iPhone to never-ending glory forever. Annualized sales also fell in 2016. iPad sales dwindled for thirteen straight quarters until the trend was snapped in early 2018. Mac sales peaked in 2015.
But AAPL was introducing new, must-have products the whole time.
The company was innovating the whole time. While the Apple Watch is admittedly something new, it’s also admittedly a shrunken-down, somewhat limited iPhone worn on your wrist. Game-changing it’s not.
It’s a symptom of a problem most fans and followers (and owners) of Apple stock have turned a blind eye to for years: AAPL hasn’t suffered a sweeping, catastrophic and rapid loss on any front, but it’s slowly deteriorating on all fronts. It’s all unfurled so slowly, in fact, that it’s been difficult to tell at times.
Making it even more difficult to spot is pretty consistent revenue growth, which in retrospect was mostly driven by the iPhone… the same iPhone that IDC says is losing market share, and the same iPhone that Apple suspiciously stopped reporting unit sales for. That’s the same iPhone we were already not supposed to be able to “live without.”
A lot of people are living without it, as they have evidently still not been stunningly impressed by its past innovations.
The Outlook of Apple Stock
Just to quell the counterarguments already being prepared, this is not the end of AAPL. Apple on its worst day is still better than most other companies on their best days Apple stock isn’t doomed.
It’s a slow, incremental headwind that could readily knock Apple stock off the pedestal it’s been on for years, though. Once that happens and investors start to treat AAPL stock like any other equity, things will change. The market will no longer blindly give AAPL the benefit of the doubt. The glass won’t always be half-full.
It’s just tough to see, and even tougher as long as investors are willing to ignore the odd number of buzz-creating words and phrases Tim Cook is now using on a regular basis.
Saying you’re going to innovate doesn’t mean you’re actually innovating… at least not in a game-changing way. It’s a paradigm that’s been chipping away at AAPL for years, but may have quietly pushed the company past the tipping point last year.
As of this writing, James Brumley did not hold a position in any of the aforementioned securities. You can learn more about James at his site, jamesbrumley.com, or follow him on Twitter, at @jbrumley.