Apple... 5 Reasons it's Now Compost!

Andrew is a member of The Motley Fool Blog Network -- entries represent the personal opinion of the blogger and are not formally edited.

Apple (NASDAQ: AAPL) makes great products; that's pretty undeniable.  I expect the company to continue to make great products well into the future.  I also expect millions and millions of customers all over the world to continue to buy and love almost any Apple gizmo that is released.

The market is, however, a very forward thinking animal.  The stock may have already had it's moment in the sun.  Here are 5 reasons why I believe this to be the case.

1.  Steve Jobs is gone, and it's finally starting to show.

After the tragic passing of Steve Jobs a little over a year ago, there was speculation as to whether or not the company could continue to dominate in his absence.  He truly built a great team around him.  It was never a one man show with Jobs at the helm and a bunch of peons working like Santa's elves.  The stock has performed incredibly well since his passing, gaining over 50% in value.  I'm afraid, however, that great stock run may have finally come to an end.  From his deathbed, Jobs advised Tim Cook how to run the company well into the foreseeable future.  I think Cook has finally witnessed the end of that foreseeable future and now he's truly left to his own devices to steer the company, alone.  

Since the release of the first iPod, Jobs had a knack of pulling a rabbit out of a hat at nearly every turn.  Don't get me wrong, Cook is a great CEO, but he's clearly not a once-in-a-generation visionary.  It's easy to see.  Apple hasn't really "revolutionized" anything since Cook took the reigns.  The iPods, iPhones, and iPads keep getting marginally better, but Apple has stopped inventing new multi-billion dollar markets out of thin air. What would Jobs do in the new era of Hulu and Spotify for just one tiny example?  Would he have made an unbelievable Apple TV and have revolutionized the way people watch and pay for TV content?  I'm not Steve Jobs, but my guess is that he would have done something HUGE by now.

2.  Expectations are too high for Apple.

Apple shareholders have become accustomed to Apple "beating the street" and setting record profits almost every quarter.  The past 12 months have been great for their stock, but serious doubts have begun to arise about Apple's future.  They seem to be losing steam.  The iPhone 4s and iPhone 5 didn't exactly turn the tech world upside down. The company is still elite, but it now seems somewhat "mortal."  Just one bad quarterly earnings report could spark a serious and sustained sell off.

3.  Competition is actually catching up.

Samsung and Google (NASDAQ: GOOG) in particular have really started to up their games in the smartphone market, by far Apple's largest source of revenue.  It's no longer a given that Apple has either the best hardware device or runs the best software platform.  Many App developers are finding Google's Android platform to be the first choice when creating new Apps.  In the past, the vast majority of App developers were starting with Apple and then possibly adding an Android App into the mix as an afterthought.  Now, it's often the other way around.  While Google Play isn't quite as clean or as pretty as Apple's iTunes, it's certainly made up a lot of ground.  Android also accepts Apps almost automatically whereas Apple declines a lot of Apps and makes developers wait a long time before allowing Apps into their store.  App makers used to put up with it because Apple's lead in the App market was so massive it was worth the wait and investment.  It's now a much tighter race and many new Apps are appearing on Android first.

4.  The brand is starting to losing it's luster.

This is admittedly more of an opinion than a fact, but I often travel throughout all the major cities in Asia Pacific and I can see a dramatic shift towards non-Apple smartphones.  The Galaxy Note seems to be rivaling the iPhone 5 for the sexiest and coolest phone on the market.  This is a new and dramatic shift.  Millions of Chinese bought the iPhone 4s in droves just to "be cool."  Many Chinese people I know readily admit this.  The coolness factor of owning an iPhone is finally wearing thin.  People don't seem to be pulling them out of their pockets to show off like they used to.  Now they are just a good phone and no longer the status symbol they once were.  iPads and Macbooks still seem to have the most sex appeal in their respective markets, but these are smaller markets.  I wouldn't be surprised to see a shift here too in the coming months.

5.  Their high price tags and huge margins on accessories will be tough to continue.

Apple makes a killing on accessories.  They cost next to nothing for the company to produce and they've been selling like hotcakes for years.  I'm talking about things like iPhone cases, iPad covers, and now the new $30 "lightening" cable that comes with the iPhone 5.  It's not new that Apple's common practice of gouging consumers annoys many customers.  What is new, however, is things like this are making consumers actually think seriously about switching brands.  Apple will have a very difficult time continuing to justify their incredibly high price points given the fact that serious alternatives are finally here and the playing field has been somewhat leveled. 

Here's a link to my personal tech and international investing blog where I discuss companies like Apple in more detail.

Foolish Bottom Line

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Fool Blogger Andrew Best owns shares of both Apple and Google. The Motley Fool owns shares of Apple and Google. Motley Fool newsletter services recommend Apple and Google. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.If you have questions about this post or the Fool’s blog network, click here for information.

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