Apple Stock: Is Apple Inc. (AAPL) Losing The Plot?

  • Apple iPhone sales have declined this year despite troubles at Samsung.
  • New Macbook Pro underwhelmed press and consumers.
  • Recent acquisitions set to become big growth drivers for Apple revenue.
Apple Stock Is Apple Inc. (AAPL) All Set To Lose Brand Power
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In the not too distant past, Apple Inc. (NSDQ:AAPL) was viewed as a safe bet. Year-after-year they continued to beat sales records of their flagship product: the iPhone. However, underwhelming product launches in the past 12 months forebodes a loss of brand power.

Notably, iPhone was a key part of the company which seemed to have no ceiling with regard to revenue. Between 2007 and 2015, iPhone sales have been on a steady incline. This is despite repeated calls for “peak iPhone”. However, Apple sold lesser iPhones in the third quarter of 2016 (Apple's Fiscal Q4) as compared to Q3 2015. Notably, Samsung took a big PR hit due to Galaxy Note 7s catching fire. One would think that such an event would cause iPhone sales to increase. (See also: Apple Stock: 3 Hidden Growth Catalysts For Apple Inc. (AAPL) Stock)

The pace of innovation at Apple has slowed down in recent years. For instance, the launch of the latest Macbook Pro seemed to draw more negative sentiment from press and consumers than any other Mac product in recent years. A key part of Apple’s brand image was the hype surrounding each product release and the hysterical demand for their products. However, the gap between themselves and other competitors is closing.

For instance, as Apple’s brand grew sharply during the past 9 years, Microsoft corporation (NSDQ:MSFT) was unable to gain ground with their devices. However, during the past 24 months, they announced HoloLens- a future facing virtual reality product, the Surface Book and Surface Studio which were well received by the press. Notably, Surface revenue is up by 38% and cloud services grew by 8%. The tide seems to be turning and so far Apple has yet to respond.

Apple’s iPhone sales are taking the typical shape of a product on the decline. This is partly due to the fact that consumers haven’t been treated to a radical new design in the last few years; moreover, competitors are creating compelling products which match or beat the iPhone with regard to specs. Notably, 3 of the top 5 smartphone makers in the world are occupied by budget, Chinese manufacturers. Five years ago, western consumers shied away from the likes of Huawei due to the perceived low quality and poor design. However, Chinese manufacturers have mastered the art of selling more for less.

Apple won’t be able to compete on price but it is vital that the pace of innovation increases. The rapid growth of the iPhone was due to the notion that they were a step ahead of competitors. This made the iPhone a highly desirable smartphone. Fast forward to now and consumers have more choice than ever.

Notably, Apple’s next growth driver is unlikely to come from a device. We have reached a point whereby manufacturers can only make incremental changes. The next growth driver lies in software. Consumers are now much more interested in content and experiences (VR). Apple recently went on an acquisition spree in order to invest in machine learning, AI and bio technology. As we enter this next phase, it is Apple’s execution on this which would make the biggest difference in the future.

Investors would like to see the risk-taking company of the Jobs era. This was what gave us the game-changing Macbook Air, iPhone and iPod. At the moment, it is clear that they are happy to stay within their comfort zone and hold a confidence bordering on arrogance.

It is worth noting that the Apple watch and other acquisitions give us a good idea about the direction Apple is heading in. For instance, they purchased Gliimpse (personal health info collection) and a host of machine learning companies. This gives them the opportunity to completely change the way the health industry collects data, and uses that to give a treatment. This is a multi-trillion dollar industry; therefore, innovative solutions could prove to be game-changing. Moreover, the Apple Watch gives Apple the opportunity to integrate more deeply into people’s lives. It links with an increasing number of products and services. (See also: With A Push From Health Insurers Can Apple Watch Boost Apple Inc (AAPL) Stock?)

A big growth driver for Apple would be to release a well priced Apple Watch which can be used without an iPhone. Although the Apple Watch hasn’t proved to be a hit, market trends and deep integration could make it the revenue driving successor to the iPhone.

Conclusion

In conclusion, investors are starting to worry about the prospect of Apple losing their brand power. 2017 is likely to be a critical year for Apple stock and its investors. Evaluating technology stocks? Check out Amigobulls' top tech stock picks, which have beaten the NASDAQ by over 115%.

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  • I am not an investment advisor, and my opinion should not be treated as investment advice.
  • I am not being compensated for this post (except possibly by Amigobulls).
  • I do not have any business relationship with the companies mentioned in this post.
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Comments on this article and AAPL stock

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steve.hane
bullish
Samsung's exploding phones came to a head within the last 4 weeks of the September 2016 Quarter so of course additional sales related to that weren't evident yet. Cook was being conservative on the conference call as he always is. The guidance for Q1 2017 was to beat the previous year which in turn had beat the previous year, albeit narrowly. It is worth noting that these Q1 performances are the largest profits of any company ever so an impressive accomplishment that seems to get met with a "ho hum, it's only money" attitude from investors. I thought making profits was the job of tech companies, but apparently investors like companies that just burn money up in search of the next big thing when Apple has been printing cash for years. To have a low single digit PE on this stuck is ludicrous. No one else produces this caliber of product line and can deliver to a justifiably loyal fan base. The MacBook Pros are reportedly selling very well in spite of the critics opinion. Maybe we should wait to see what the actual numbers are before prognosticating doom. You can always find something to be positive or negative about.

The question is is the future brighter than the past? With the massive moat that Apple has built with its installed user base of hundreds of millions, over $140million in net cash and a stock price that is well below the price for any other tech company it is hard to not buy Apple stock with both hands on any day.
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