So Are the Apple Haters Giving Up?
December 6th, 2013As Apple’s stock price approached the highest levels in a year, you had to wonder what happened to the company many industry analysts thought to be beleaguered. Was Tim Cook replaced? Well, obviously not. Did Apple deliver a cheap iPhone? Another no. Was there a new Apple branded TV set with the “magic” interface predicted by Steve Jobs? No, not that either.
So is there some significant change in Apple’s current sales or future prospects that seems to have fueled a huge turnaround for everyone’s favorite, or not-so-favorite, fruit company? This is the question of the ages, and actually Apple hasn’t really done anything so different, except for granting stock dividends and buying back some shares. Indeed, activist investor Carl Icahn is pressing Apple to do even more, but that’s not necessarily a valid reason for the stock price to rise. Besides, Apple will probably just say no to Icahn, as they have so far.
Now I wouldn’t presume to have any pithy comments to make about the actual mechanics of Wall Street. A lot of what investors do or not do is based on perceptions more than reality. In the case of Apple, some believed that the company had run out of steam. Part of that was due to the obvious fact that Steve Jobs is no longer around to steer the helm, and Tim Cook is surely not a product person. Thus Apple must lose its direction.
What appears to have happened is that every little bit of potential negative data was used to demonstrate that Apple was on the skids. There were published reports last year about the supposed lack of demand for the iPhone 5, but it all started when the product was first introduced. Apple sold five million as of the first weekend, a record to be sure, but some industry pundits who must have been drunk with power predicted it would be ten million. Since Apple didn’t meet such exaggerated expectations, it must have been a huge failure. The iPhone was dead, may Android live on.
In the real world, the iPhone 5 did quite well, even in quarters where industry pundits suggested otherwise.
Indeed, I sometimes wonder whether some people in the financial industry make a living by talking Apple down. A few negative comments here, a few unfounded rumors there, and the stock price dips. It’s actually possible to make money by anticipating a stock price dip. I could be even more conspiratorial and suggest that maybe some of Apple’s competitors are happy to spread misinformation to hurt the company. When billions of dollars of sales are at stake, you can expect cutthroat competition. It’s also true, for example, that Samsung has had a less-than-stellar record for corporate honesty, and has been known to play dirty tricks against the competition. And don’t forget how some Samsung smartphones have code that deliberately makes benchmark apps run faster to deliver better ratings. How does that improve the user experience?
Sure, some might argue the finer points of Apple’s own competitive information, since the material is clearly designed to put the company in the best light. But a little exaggeration or selectivity here and there is not the same as lying.
As I was writing this article, I heard an interview with some unspecified analyst on Bloomberg Radio, who explained why Apple’s major growth cycle was in the past. The theory went that Apple has made deals with Japan’s largest wireless carrier, NTT DoCoMo, where the iPhone is doing very nicely thank you, and China Mobile, the world’s largest carrier. This will mean more sales, but where does Apple go from there? Clearly the growth rate has to decline.
Evidently the analyst didn’t consider that there are other parts of the world, such as India, where there’s still great potential. More to the point, what does Apple do from here? Will there be no more category busting products? What about the long-rumored iWatch, or the possible solution to living room entertainment? What about market segments and products that aren’t even mentioned on the rumor sites? Does Apple rest on its laurels?
Yes, it’s true that Apple can’t grow the smartphone and tablet market by 100% every single year, and Mac sales are eroding somewhat. But that doesn’t mean future upgrades won’t reinvigorate these markets, or that there won’t be something new and different from the company that can grow at an accelerated rate. The long and short of it is that, so long as Apple continues to make high profits with steady revenue growth, year after year, what should investors complain about?
The stock price? We forget that this roller coaster syndrome has happened before to Apple. What’s different? Well, this time the amounts are far higher, and thus appear to be more significant. In each case, the price dips way down before resuming a growth curve. Of course, I’m in no position to predict what is going to happen this time as the price continues to soar. By the time you read this article, things may change. Or maybe Apple will first reach new heights before the price drops. If that happens, you can bet that the critics will be pronouncing doom and gloom as vigorously as ever.
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My theory on recent AAPL movement is that:
1) It’s past the one year anniversary of AAPL’s top of $705 on Sept. 17, 2012. This gives the pros some wiggle room on their spreadsheets.
2) The China Mobile deal is pretty freaking huge. Huge enough to hit the Buy button. Ballpark estimates at around $70B in new revenue.
3) As you say, Gene – “Apple continues to make high profits with steady revenue growth, year after year, what should investors complain about?” Yeah, maybe the market is waking up to the fact that this is a good thing and not a disappointing thing.
No, they haven’t given up. They just will need something else to whine about. It’s their job. It’s how they make money. The more hits they get the more money they earn, and if you knock Apple you’ll get more hits. That’s simple math. You should remember, however, that the Apple-hating analysts are simply a modern version of carnival fortune tellers. The only difference is that they’re not as accurate…or as entertaining!
Other than to investors, who cares where the stock is priced due to manipulation. Apple has a pretty long run ahead with just their existing products. Even if the stock plunged to a dollar due to this manipulation, Apple would just buy all the stock back and go private. This isn’t going to happen. If there is consumer demand for Apple products, Apple will continue to make them.
The stock market has always been an avenue to gambling with options and shorting. Today with computerized trading, selling million of shares at a push of a button can reap big bucks. I would like to see a new charge/tax on the sale not on purchases which should be encouraged.
It is tough to see Amazon “house of cards” stock continued to have high valuation with little to no profit. Then, watching Apple share value bouncing around while the pile of money growing higher while paying out a nice dividend. Make no sense (or cents).
In several previous posts I’ve been saying that Apple has a whole new world to conquer, having to do with those in-dash information/entertainment/navigation centers (most of which are lousy, and some are downright dangerous), and by jings it’s starting to happen. SInce Apple has to infiltrate this market on a case-by-case basis, making individual deals with individual car mfgrs., there’s not going to be any splashy announcements coming out of Cupertino, so it’s unlikely to register on market analysts’ radar. But if you keep your eyes open you can see Apple once more stealing a march on everybody else in the industry. Here’s an example of what I mean: http://www.macrumors.com/2013/12/03/honda-boosts-ios-car-integration-with-new-hondalink-services-for-2014-civic-2015-fit/
@dfs, Thanks. This raises some fascinating possibilities.
Of course, this will require that the analysts actually do some work to figure out what’s up.
Peace,
Gene
“Wall Street Investors” is misnomer!!!
The correct nomenclature for these people should be “Wall Street Gamblers”!!!
The car companies insisting on their own lame apps should not be unfamiliar. It is exactly the same as the approach taken by “Internet capable” TV’s have taken. Why can we only utilize one corporate sponsored channel or another? It’s all about control. If they let us out on the open net we’ll never cough up another dime to the gatekeepers.
The car company that puts out a truly open system will be the one that wins in the end. If they can resist the temptation to gouge their customers in the short run they will be repaid many times over in the long run.
I think that the problem goes much deeper than “lame apps.” Car companies are finding they have to rethink their traditional idea that their onboard computers should be proprietary systems, and as closed as possible, They’ve done this as a strategy to compel owners to go to their service departments rather than (often cheaper) third-party mechanics. Hell, I can’t even interact with my car’s computer to the extent of adjusting the point at which the tire inflation warning goes on when I put on a new set of tires with different recommended inflation than the factory originals, they require me to come into the dealership for that. Probably in the past this strategy has indeed been profitable for them. But the problem is that the digital equipment they are putting in their cars these days is so complex, and nowadays so interactive, that they’ve they are way beyond their depth. For example, these information/entertainment/navigation centers get them into the area of human-interface ergonomics, something way outside their traditional area of expertise, and so far their stabs at creating these system haven’t worked out so well. So they are waking up to the fact that they need to partner with major electronics firms which are good at that kind of stuff. And who does it better than Apple? There’s something else, too. The state I live in, and others as well, have banned using cell phones while driving on the grounds that they are dangerously distracting. Sooner or later authorities are going to take a harder look at the safety implications of these in-dash centers and it would be a major setback to the industry if the law started cracking down on them. There’s an obvious solution: Siri technology.