An Apple a Day will make you Richer than your Doctor
Moustafa 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) holds the envious title of Rock Star more so than any other company in the world right now. People sleep outside their stores on product launches, they have rabid fans and their products permeate everyday life.
Apple held their Worldwide Developers Conference on June 11 and, not surprisingly, tickets to the event sold out within two hours of going on sale. Apple has survived the death of their celebrity leader Steve Jobs and have flourished recently, becoming the most valuable company in the world.
Investors either seem to love Apple or think that it is too good to be true and is destined to disappoint. The tech industry is littered with once-dominant giants that are either gone or shadows of their former selves -- Kodak, Nortel, Nokia and Polaroid dominated their industries before getting left behind. Looking at Apple’s amazing share appreciation even in the last six months, you could think that maybe it's next.
They face stiff competition in all of their markets from major players looking to unseat them. Google (NASDAQ: GOOG) purchased Motorola and with its Android OS is taking a run at the iPhone. Google has the cash, the tech with its purchase of Motorola, and the OS to challenge Apple in the handset market. They are also releasing a tablet that will resemble in size Amazon’s Kindle Fire. It will operate on the updated OS referred to as honeycomb.
Amazon (NASDAQ: AMZN) has developed not only a tablet but an extensive array of cloud-based services referred to as AWS or Amazon Web Services. They act as high powered servers for clients from small businesses to Netflix. Amazon sells e-books through its Kindle service and everything else imaginable in its marketplace platform. Just ask Circuit City and Best Buy what kind of damage Amazon is doing in the electronics market.
Samsung was one of Apple’s main hardware suppliers until they came out with their own sleek handset and tablet and now are locked in court with Apple over patent infringement. And some people forget that Apple still sells phenomenal computers and with its Mac series competes with the likes of Compaq, Dell and Lenovo.
You could look at this and see that Apple is up against some major challengers. This is amplified by the fact that they recently lost their visionary founder and without that type of vision, could fall from glory without any new and groundbreaking products.
While all these concerns are valid, Apple is not only in good shape to deal with these challenges, they are in Mike-Tyson-in-his-prime shape to beat the market moving forward. They not only have one of the most recognizable brands on the planet, they have ardent fans in many countries including the country with the third most millionaires (China). Apple has released a new OS for its Mac computers called Lion. They have 66 million users, which looking at the global computer market is a small number. That provides them ample room to grow. My laptop is winding down and the more I hear from friends and colleagues the more likely it will be that my next laptop will be a Mac. They are upgrading their mobile OS as well as providing some new features for the couple hundred million iPhone users out there.
It was announced that Facebook (NASDAQ: FB) will be fully integrated into the new mobile OS, which will help Facebook remain relevant. Providing a gateway to the FB platform to 200 million plus and growing users can only benefit FB. They have been attacked for their poor mobile apps and this integration will hopefully alleviate that by providing a more seamless use of FB on the iPhone and iPad. This benefits Apple in that it provides another reason someone will want to buy an iPhone.
Apple has continued to vertically integrate its entire platform so when a user purchases and iPhone they will most probably, using iTunes, purchases some apps for their device. They will also purchase movies, books and music, which can then be stored on the Apple cloud and accessed through a wide range of Apple products. All this yields more purchases within the Apple ecosystem and drives more adoption of their products.
Celebrity CEOs are not always the cure all for companies. Looking at IBM’s (NYSE: IBM) growth over the last decade you can see the company has made tremendous gains in its software consulting businesses while selling off its underperforming hardware division. It has steered itself out of difficulty and has continued to return impressive growth in its share price over the last 5 years.
Through this impressive turnaround and growth IBM has had a number of very competent CEOs that never achieved celebrity status. What was created at IBM was a culture that permeated the entire organization. This culture seems to be present at Apple, and that is a culture of innovation. Just because Jobs is no longer alive his legacy will go on within the company and its culture. It has been reported that Apple has up to 5 years of Steve Jobs-influenced products in their pipeline but even after that the people he hired and trained will hopefully hire and train others who will maintain and improve upon the culture that has made them so dominant.
I see Apple as the stock to buy now and keep buying moving forward. It has pulled back since it hit $600 earlier this year but it will reach that level again, on its way to $1,000. The company is trading at a relatively low P/E, has mountains of cash, is returning that cash to shareholders and has new products on the horizon. This very well could be the perfect investment, one of the few times where it just keeps getting better. If I could only hold one stock for the next 5 years it would be Apple.
mooseelz owns shares of Apple and Google. The Motley Fool owns shares of Apple, Amazon.com, Google, and International Business Machines. Motley Fool newsletter services recommend Amazon.com, 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.