Apple Stock has gotten a bit of a beat down lately after finally experiencing what everyone knew would have to happen someday. It seems that Apple has finally saturated every market on earth, and there will be no matter automatic increases in number of devices sold in ever category.
Of particular concern to most investors is the drop in iPhone sales. It turns out there are two major issues. First, is that in China, iPhones are no longer the must have item they once were. The other is the maturation of markets.
Apple No New Products
When you make a brand new product, or in Apple’s case, when you create a new product category, you get a sales trajectory that includes people buying it because it is new and different, and surely there is something that you can do with it. Of course, over time, this free pass sort of evaporates as people learn what they can and can’t do, and whether or not those things matter to them.
Recently, Apple enjoyed great success with the iPhone 6, in large part because Apple finally offered a big phone. Naturally, Apple users ran out and bought the bigger phone. However, now that there is an iPhone big and small, people are making choices rather than just buying whatever is out there. The new SE iPhone, for example, was skipped by anyone who decided they wanted a big iPhone.
The same issue is kicking in on tablets. Where once an iPad was this great new thing, it turns out that maybe people don’t need the next one. In my household, the iPad is primarily used by the 6 year old. It turns out, I need a keyboard for most anything but web browsing, so tablets aren’t really my thing, especially at the iPad price point.
The concern for investors is that previously, Apple always had an answer for this issue. There was always a new product, or a new version to light everything on fire. That hasn’t happened yet.
Apple Stock Outlook
So, what does this all mean for Apple stock?
In the near term, it has meant a drop in Apple stock. In fact, MarketWatch noted today that if Apple closes down for the day, that will be the longest loss streak in 18 years. If you think about it, that says a lot more about the last 18 years than it says about today.
The short answer is that if you want to buy Apple for a quick little run up in the next six to twelve months, that has become a pretty big risk. But, what about for longer term investors?
Here is where things get interesting. Apple will eventually come out with an iPhone 7. Even if it is nothing but faster and better looking, you can count on big sales, as Apple fans love to have the latest and greatest technology whether they need it or not. If it actually has something new and revolutionary, well, that’s going to be big, big sales.
In the meantime, a $93 share price has pushed the dividend on Apple stock into the 2.4% arena. In other words, if you like Apple stock and still believe in the company’s ability to generate great products, then you have a great little investment that pays you a solid dividend while waiting for the next big thing to come along and make your investment profitable from a capital gain standpoint.
In other words, the only real reason to look poorly on Apple stock is if you believe this is peak Apple. That is, if you think the company will never come out on top again. Has Apple become Microsoft? That’s a tough bet, even if you think the company has lost some luster without Steve Jobs. Apple is still the market share leader in most of its categories, even if those categories aren’t getting any bigger. And, its earnings and profits are still huge.
If you can ignore the short-term pricing and are willing to hold on for a year or two minimum, chances are you’ll come out with some nice gains and get almost 2.5% per year along the way. Looks like a win / win for longer-term investors, but a lot more like catching a falling knife for short-term investors.
This article is for informational purposes only and does not represent a recommendation to buy or sell securities. I am not an investment advisor or financial planner any longer, nor do I hold myself out to be one. Consult with your financial professionals for information specific to your own situation. At the time this article was published, the author owned shares of Apple stock, but that may change at any time without notice.