To buy, to hold or to sell? That is the question most people are thinking about.
Apple (Nasdaq AAPL) sailed, actually blew past most of Wall Street’s fourth quarter estimates. That makes a lot of analysts pretty happy but there are a bunch of them around that aren’t as excited.
These analysts caution that Apple may well be pretty close to the heights it can ever reach. While the iPhone and Mac are gathering good numbers the same hasn’t been the case with the iPad. IPad sales are not anywhere near where they used to be and longtime rivals Google and Samsung are no slouches either.
Even with Apple CEO Tim Cook’s supply chain expertise, the company still is unable to meet the huge demand for the much hyped iPhone 6 and iPhone 6 plus phones.
Though the scenario has been similar to what iPhone customers have experienced in the past with every iPhone release, this time around it has been worse. Some customers have waited for months and many have survived serpentine queues only to go empty-handed.
The concern has also been acknowledged by Apple’s CEO in the fourth quarter earnings report. Tim Cook acknowledged that looking at the data he did not believe that that they were on the same planet with respect to supply and demand.
The good part for Apple in spite of all these delays is that the iPhone 6 and 6 plus still shows strong, sustained demand.
So why do some analysts feel that Apple may be at its peak?
Apple is a dominant force, globally. In the segments in which Apple operates, its products are amongst the market leaders and is also highly profitable. But then, the future may be very different from what it is today.
Cut throat competition exists in the high tech industry that Apple operates in. The life cycles for its flagships products are exceedingly short. Out of its two most important product lines – the iPhone and the iPad, the decline of iPad sales ably justify that fact. In a couple of years, the products that Apple currently roles out will be obsolete. The industry landscape will also be significantly different during that time.
The rate of technological obsolescence is at an all-time high. Going forward it will only get shorter. Entirely new products will replace the ones that are currently existing. Since barriers of entry are low, there will a plethora of new companies vying for space. Hyper competition will bring products to the market that will possess great quality at lower than lowest prices. Even Nostradamus with all his ability would be at sea, predicting who would be dominant or which products would be ruling the roost.
For all we can fathom, Apple may scale even greater heights. It may also become more valuable than it is now. Or on the other hand, Apple may not be the uber cool brand, whose products people take pride in possessing. They may no longer have the dominance that they command now. If profitability hits, the stock may soon lose its sheen and become worthless.
Remember what happened to the likes of Palm, Motorola, Nokia and Blackberry. These once loved, highly revered companies have had a rough and sad fall. All of these giants went from being the darling of many, even global dominance to their nadir in just a couple of years. No one but their shareholders know better.
There is only one thing that we all can be certain about, the Apple of tomorrow is not going to be the one we see today. The circumstances will be different and if Apple is to survive it would need to become different too. Fundamentally different at that.
Investors at Apple simply cannot assume that the current line of products will stay dominant or profitable. While Apple has a history of introducing innovative products and completely new lines of business such as Apple TV or the iWatch, whether they will succeed or be as profitable is something that no one can predict.
Apple has been doing well lately. Its current market cap at around $700 billion is far-far away from its competitors Microsoft ($394 billion) and Google at $367 billion.
Over the last three years, Apple has proved many a sceptic wrong. Tim Cook has more than doubled its stock price. Something truly remarkable since many doubted whether Cook had the leadership abilities that Jobs possessed.
Whether this trend will continue is anyone’s guess but if the iWatch were to have the same degree of success as the iPhone then there might not be much keeping Apple from breaching the Trillion dollar mark.
For all the analysts trying to figure out which route to go, the folks at Cupertino may well be way ahead of the game.