Is This the End of Apple?
Howard is a member of The Motley Fool Blog Network -- entries represent the personal opinion of the blogger and are not formally edited.
Monday's news of Apple (NASDAQ: AAPL) cutting production of their flagship product the iPhone 5 by half has investors concerned that the “end of Apple” is starting to rear its head. While there are maybe a few reasons to be bearish on this stock, there are far many more reasons to be bullish.
Reasons to be bearish
Reportedly Apple notified suppliers last month that it was cutting orders of LCD screens and other components. This could mean that consumers are finally getting tired of buying a new iPhone every year. With iPhone being Apple's flagship product, the diminishing sales could be trouble for the tech giant. Investors are also concerned about the passing of legendary innovator and former CEO Steve Jobs, who was seen widely as the driving force of Apple's success. Some people do not have faith that Apple can replace his vision. Maybe the most telling statistic is the decline of Apple's share of the smartphone market which fell to just 14.6% in the third quarter with Samsung's Galaxy controlling 31.3%.
Why you should be bullish
Despite the reports of iPhone 5 production declining this does not mean that the iPhone is still king of smartphones. We have heard for the past few years of a new “cheap” iPhone set to come out soon. If the rumors of this “cheap” phone are true, sales could reach the low-end market that Apple previously did not appeal to. Also we can count on an iPhone 6 within the next year or two. Investors also need to tune out the noise of the declining iPhone production and remember that the iPhone is just one of many Apple products, including the popular laptop models, Macbook pro and air; desktop models, Mac pro, iMac, and Mac mini.
The silicon valley company has been the the leading innovator in tablets and just recently released the iPad mini. Along with leading mp3 players, the company is also venturing further into consumer's homes with the new Apple TV. Clearly, they still have many products to bring in steady revenue, even if they did supposedly lose their innovative edge.
The company also has been in the news trying to reach deals with the Chinese telecommunication giant China Mobile (NYSE: CHL). China Mobile, one of the largest wireless companies in china serves about 650 million customers, adding 65.9 million customers in 2011. They also provide 3G services to 51 million people adding 30 million in 2011. China mobile is a large but still growing wireless provider that is starting to expand into the 3G market. This is all good for Apple if they can reach a deal and have access to over 600 million new customers.
Apple is still a good buy at a P/E of 11.42, which is an extremely low valuation for the most profitable tech company in the world. With a potentially growing market, a long list of popular products that are still innovative, the stock is a good buy.
Hjcranford has no position in any stocks mentioned. The Motley Fool recommends Apple. The Motley Fool owns shares of Apple and China Mobile. 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. Is this post wrong? Click here. Think you can do better? Join us and write your own!