Apple Is No Rolling Stone: It's Just A Misconception
Nicholas is a member of The Motley Fool Blog Network -- entries represent the personal opinion of the blogger and are not formally edited.
`A rolling stone gathers no moss’, is a saying coined by Publilius Syrus, a Syrian slave turned Author in Italy, in the 1st century BC. He used it to refer to “People who are always moving, with no roots in one place, avoiding responsibilities and cares. However, the quote also refers to stagnation, or inability to innovate.
Apple (NASDAQ: AAPL) is the pioneer of smart devices, having invented the iPhone in 2007, but more importantly, the invention of Mac computers back in 1984 to become the first commercially successful personal computer. The iPhone maker is a recognized innovator in mobile technology devices with its iOS acting as a benchmark for several competing platforms.
However, the world’s largest company by market capitalization seems to be running out of ideas at a vital time when other giants like Google (NASDAQ: GOOG) and Samsung Electronics are beginning to flex their muscles. Nonetheless, the company’s income statement, balance sheet, and statement of cash flow retain their outstanding qualities in the industry.
Analysts are increasingly cutting down Apple's price target, continuing to make the stock a pure bargain while its market price continues to roll towards the wrong direction. Apple is no rolling stone, but it’s behaving like one. Apple closed receently at $485, the lowest adjusted closing price in nearly a year. Having hit a high of $705 in September, the company has now fallen 31.2 percent below its all time high, which was achieved less than four months ago.
The biggest question is why the fall. Many say that a fall from grace can happen in a fraction of time; on the contrary, it takes years to build an empire. So, could Apple be falling apart, or is it just running out of ideas? This probably signifies stagnation, however, I think this tech giant is just about to reinvent itself. Apple is no rolling stone, and whatever is happening to its stock price perfectly qualifies as a misconception of the investors on its outlook.
We cannot deny the fact that Google and other rivals have done nothing but to cannibalize on a niche founded by Apple. Nonetheless, Google’s Android platform compounded with the venture into the manufacture of smart devices, and along with gigantic partnerships with leading manufactures like Samsung seem to be taking the leadership in the U.S; Apple’s biggest market segment.
So how, can Apple prove to the world that it is not becoming a rolling stone? Well, According to recent developments, the company has already identified China as the successor to the U.S in terms of sales contribution by geographical location. Additionally, Apple is looking to tick its web services business, an area that could be key for the company’s future.
Tim Cook expects the world’s most populous country (China) to become Apple’s number one market in the near future. Apple has already molded a brand that the Chinese people identify with, as far as status is concerned. The Chinese are known for their affection for electronic devices, and Apple’s uniquely assembled iDevices seem to have won their hearts.
Whether or not, there is any rival capable of changing the status quo remains to be seen. The iPhone maker could be soon looking at market potential in extent of one billion customers for its iPhones, as China Mobile, China Telecom and China Unicom, the country’s leading carriers combined, surpassed the one billion mark for the total number of customers. While this number includes the 2G customers, and of course still remains up for grabs for competing companies, including Nokia and Samsung, upgrading is on course as more customers switch to a 3G network.
Additionally, Apple is believed to be pondering the launch of an iTV sometime this year. This will open the doors for the company in widening its entertainment business unit, which features the iTunes App store. Apple’s App store still commands a lot of loyalty from customers, and widening its potential can only result to an upside in revenues and gross margins.
Another area that Apple should be looking to work on is its next generation of iOS. Reports indicate that Apple has a huge potential in Mobile Cloud computing, but only if the company iOS 7 includes enhanced features. For instance, reports indicate that better Siri integration and multitasking as well as toggles in the notification center would be key. Other features suggested by the media include improved native app flexibility and app reviews to allow users to assess apps before purchasing.
Apple’s latest performance at NASDAQ stock exchange is depicting a picture, which many investors are probably posing the question, “Is this really Apple?” To be honest, very few analysts would have predicted Apple to trade below $500 in 2013. Indeed, according to recent statistics published by CNN’s Fortune magazine, the average target price for the company was estimated at $740, with some firms putting it at $900. But alas! Apple seems to be rolling down the cliff.
However, the company’s fundamentals and strategy remain outstanding. The company’s cash account reads figures in excess of $50 billion. Some of its rivals would need two years to generate revenue equivalent to that, leave alone cash reserves. Apple needs to change the mindset of investors to send shares on a rally, and it has the right tools in place. Selling now would be a terrible mistake.
Nmaithya has no position in any stocks mentioned. The Motley Fool recommends Apple and Google. The Motley Fool owns shares of 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. Is this post wrong? Click here. Think you can do better? Join us and write your own!