Apple: Strengths, Weaknesses, Opportunities, and Threats

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

A SWOT analysis is a look at a company’s strengths, weaknesses, opportunities, and threats, and is a tremendous way to gain a detailed and thorough perspective on a company and its future. Fresh off their fourth quarter earnings report, which was a beat and miss in different respects, I would like to pinpoint on the most valuable company in the world, Apple (NASDAQ: AAPL).

Strengths:

  • Apple is valued at $567.28 billion on the market, and they didn’t get to where they are by snoozing, they got their by being an industry trailblazer and consistently innovating.
  • The company possesses one of most globally recognized brands, right up there with Coca-Cola and McDonald’s.
  • Brand loyalty is incredible, people will line up in the freezing cold overnight just to be one of the first to get their hands on the new iPhone, iPad, or Mac.
  • The company is irrationally undervalued, with a price to earnings ratio of 13.68, significantly lower than slower growing companies like Coca-Cola and McDonald’s.
  • The company’s year over year growth is still fast-paced, in the double-digit area for the past couple of years, and the company has just recently paid out its first dividend, which annualized at current prices yields around 1.75%.

Weaknesses:

  • Some analysts say that without legendary founder Steve Jobs at the helm innovation may slow, as Tim Cook is a good CEO but just not the same.
  • Apple operates and sells items in one of the most competitive sectors in the world, and will always have competition that will offer something very similar for a bit less.
  • Competition from deep-wallet companies such as Google, Microsoft, and Amazon may sometimes lead to the compression of margins, as in the past quarter gross margins came in at 40.0%, below the consensus of 40.8%.
  • Recent problems from their main supplier and producer, Foxconn, has caused investors to get weak in the knees as shipment dates have been pushed back and customers who pre-ordered devices have been faced with several week waiting periods.
  • While this can be used as an advantage if an investor is smart, the recent price movement in the stock has been volatile, rising $100 and then falling $100 in less than 3 months.

Opportunities:

  • While the past two quarters have not been the best for the company on a financial note, the first quarter of 2013 should be incredible, as the company should benefit immensely from the holiday season.
  • Over the past weeks the company has unveiled a flurry of new items, including the all-important iPhone 5, the iPad mini, a new 13-inch MacBook Pro, a new Mac, and a new iPod Touch, proving that the company is still innovating for the future.
  • The iPad mini puts Apple’s foot in the small tablet market, a space that for a time was eating the iPad’s lunch.
  • Early in 2013 Apple is expected to unveil the Apple version of the television, possibly the iTV, which should nearly complete the Apple ecosystem as in one common platform customers can have a phone, computer, laptop, tablet, and television.
  • In nearly all respects, Apple is relatively unsaturated in the markets it operates in, 17% in the smartphone market, 5.2% of the worldwide computer market, and the one exception, 85.7% of the tablet market, meaning the company still has significant room left to run.

Threats:

  • When you are one top, everyone wants to knock you off of your pedestal, and this is true for Apple.
  • Recently some analysts and tech junkies have claimed that Apple is behind the curve as they copy the larger screen size of some of the Android smartphones or shrink the screen size of their tablet.
  • You would think they can only slightly tweak the iPhone or Mac so many times before it simply becomes unreasonable to purchase the expensive devices every couple of years, but obviously this has not proven to be a problem yet.
  • The biggest threat to Apple’s success would have to be the stiff competition it faces, Android, Microsoft, Research in Motion, Nokia, Amazon; the list is endless.

Competitors

Major publically-traded competitors of Apple include Google (NASDAQ: GOOG) and Microsoft (NASDAQ: MSFT). Google mainly competes with Apple in the software space as their Android platform is extremely popular, however Google does not create the hardware of the Android devices they sell, so they do not have the pricing power Apple possesses. Microsoft also competes with Apple in the software space, as their Windows platform rivals Apple’s iOS software in the computer and laptop arenas. 


makinmoney2424 owns shares of Apple. The Motley Fool owns shares of Apple, Google, and Microsoft. Motley Fool newsletter services recommend Apple, Google, and Microsoft. 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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