Is Apple Ripe?
Is Apple’s juggernaut going to slow down? I think so. Here is my take on Apple earnings and the company’s 1st miss since 2002.
Back in late 2003, one day as I was dropping my daughter at school I heard her say that she likes Apple’s cool new mp3 gadget, the iPod! (1st generation). I spent a few weeks in researching iPod’s potential and I loved the gadget so much, I bought one for my daughter and one for myself. And then I went on to buy a lot of Apple shares at a split adjusted price of 11.xx. In the following 6-8 months, the stock more than doubled. I wanted to hold my Apple stake for several years later. However, on the day after 2004 presidential election, I was a bit upset with the victory of George W Bush. Against my own rules of not getting emotional about stocks, I sold a rather large position in my Apple stock. [I blew the proceeds on some other weak stock, and that’s another story.]
For a brief period during the 2008 stock massacre, I bought Apple again in the mid 90s, two days later sold it close to 120. Bought it again in high 80s only to sell the shares as a stop-loss strategy a few days later. Since then, despite my negative opinion about many stocks, I did not touch Apple stock. As recently as a couple of months ago, I said I will not buy or sell Apple shares.
As you may have already known, Apple just reported their earnings. For the first time since 2002 (pre-iPod, pre Steve Jobs reentry), they missed earnings and sales expectations. It is really no big deal if such a behemoth missed expectations due to prevailing economic conditions. Nor does one quarter make a trend. But, I see the first signs of trouble for Apple’s premium products. The other day I asked a student who just bought HTC tablet, why he diddn’t go for Apple. His answer is that for web browsing and email needs, iPad is a waste of money. I share the same sentiment, but I own a HP TouchPad ($150) as well as iPad ($700). I don’t see any particular advantage to iPad over TouchPad. On our campus also increasingly I see more Android tablets than iPads.
Here is another potential trouble for Apple. In the last two years, MacBook Pro sold very well and even gained market share from PC notebooks. Now the commoditization of tablets will cut into high margin MacBook Pro. No signs of this yet in their earnings report. But, on campus, I am increasingly seeing more tablet users than notebook users.
Overall – if the economy falters, I cannot see why it won’t affect Apple sales. And the cheap Android tablets will take several bites out of Apple. I still think that stock may have peaked already.