Has Apple peaked?
It would be difficult to name a company that seen as great of success from such depths as Apple. Apple has sold 3 million iPad’s in its first 80 days of the products release; meaning a unit was purchased almost every second. The stock has risen 30% this year and now trades at or near its 52 week high. Yet, despite such tremendous and deserved success, has Apple peaked and is it time to sell Apple stock while the going is still good?
This is not to suggest Apple is a bad company. In fact, it is quite the contrary. It is a company to be admired. But is the gushing media praise, and corresponding market expectations, justified given recent stats? Specifically, North American mainstream media continue to focus on the iPhone’s steady erosion of RIM’s market share. However, Smartphones powered by the Android operating system has or will soon surpass the iPhone as 2nd in market share in the U.S. according to most studies.
Given that Android phones are sold by various vendors and various carriers (as opposed to the iPhone which is exclusively carried by AT & T in the U.S.- for now), it takes a little digging to see that Android phones may pose a larger threat to Apple than RIM. But it tends not to make as compelling a story since it is a bunch of vendors nibbling away at Apple rather than a head to head battle of one company vs. the other.
One wonders if the one carrier strategy in the U.S. will serve the iPhone well in the long-term when Android has many champions in different carriers (distribution being a key component in the Smartphone wars- see below). Android is also Google’s operating system- Google is not going away any time soon.
The practical result is that Apple’s growth may revert to the mean which tends to bring a high flying stock back to somewhat more normal valuations (as a side-note, how can a company with $40 billion in cash and relatively low R & D spending can be considered investor friendly- how about a stock buy-back or a dividend Mr. Jobs?). To be clear, it may still make good products but it may not be a fantastic growth stock for too much longer if it keeps losing market share (lest I offend any Apple product lovers).
On the iPad front, Apple has the starter’s lead but, again, Google and Verizon are thinking of launching a competing tablet computer to the iPad with the Android operating system. What is worth noting is Verizon has had the largest mobile subscribers in the U.S. so a competing product may have better distribution channels. Plus, if Google and Verizon align, Verizon does not necessarily have to sell iPhones even if it is modified for Verizon’s network. Again, this has the effect of slowing Apple’s growth.
The iPhone 4 may will boast earnings again. However, lest one forget, the longer technology is around, the less impact a new generation has the ability to wow people. Ask Microsoft about the declining wow factor of each new operating system.
This is not the say that Apple will not continue to be a model company. I hope it continues to be so. However, it is difficult for any company, much less one in discretionary consumer products, to maintain its lead for long. Over time, it does revert back to the mean and one wonders if its time to cash out now.