Why I Believe Apple Is Still a Buy
Yasir 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) has been on a wild ride since introducing its revolutionary iPhone in 2007. After an outstanding performance in the stock market, Apple's shares have dipped quite a lot since last year. According to many people, Apple has lost its spark and is no longer one of those revolutionary companies.
Despite Apple's recent performance and a fall in its market share to only 18%, what many people fail to understand is that Apple is a brand, rather than a revolutionary company, and is likely to stay a brand for years to come. Brand loyalty is perhaps the company's biggest strength and even if it fails to innovate, its brand loyalty will save the company for several years.
What Went Wrong?
After taking the touch screen mobile technology to the next level, Apple fell behind to Google's Android operating system. Samsung, the major player in the Android market, is the company's biggest competitor, and most of the damage was done by Samsung after it came out with its Galaxy line of smartphones.
Apple's failure to adapt the latest trends in the industry also showed weakness including larger phones and cheaper models. Apple's products were targeted towards a specific type of audience while Samsung released several different models.
Sony (NYSE: SNE) is another big player in the smartphone industry at the moment and even though the company doesn't have a major market share in the industry, the appointment of Kazuo Hirai has already changed significantly and brought in a lot of optimism. Sony's latest Xperia smartphones are set to make a major impact by the end of the year, which is why Apple could find itself in a very difficult position.
Nokia (NYSE: NOK) and BlackBerry (NASDAQ: BBRY) are the other two rivals, which are still struggling in the industry. While I still believe that Nokia can have a turnaround story after Windows 8 picks up, I highly doubt if BlackBerry is going to have a bright future or a future at all.
Apple was perhaps one of the worst performing companies in 2013, in terms of its stock performance. The company has been on a constant decline since October last year when it crossed the $700 mark. With a market cap of over $391 billion, the company is currently trading around $417-$418 and one of the major reasons of this downfall has been Apple's constant loss of market share from the industry. Despite Apple's buyback and dividend increase plan, the company's last earnings report didn't leave many happy faces as it just came in line with estimates at Wall Street and showed a YoY decline. .
Sony, on the other hand, is currently trading around $21-$22 with a market cap of around $22 billion. Sony's shares have performed well this year, rising from the $12 mark in January. The new restructuring plan and the "One Sony" brand seem to be working well for the company as it made its first full year net profit in five years. The new management is probably Sony's major turnaround point, and the company is determined to excel in all its divisions. Sony's smartphone division has also seen major changes and the new smartphone line is too good to ignore. After its flagship Xperia Z smartphone, Sony's upcoming phablet, the Z Ultra, should also make headlines in the future in both the tablet and the smartphone market.
Nokia and BlackBerry are finding it hard to keep up in the industry and are trading at $3.65 and $9.55, respectively. While there might be some hope left for Nokia based on its Lumia line of smartphones, things look over for BlackBerry. The company's shares dipped again after it made a shocking loss of $84 million. After making the BB10 platform its future, I had a view that BlackBerry's good days were behind it and that it was only a matter of time when BlackBerry would start winding up. On top of that, te upcoming BBM service on Android and iOS should also mark the end of the company as its signature service is no longer limited to its smartphones.
Apple: Still a Lot to Be Optimistic About
Let's turn our attention towards Apple, again. I still believe that Apple is a buy right now and that the company's shares will bounce back in the near future, even if they don't reach the $700 mark again.
The company's upcoming products will be the key to its turnaround by the end of 2013, and I believe that a lot is going to come out before the year ends. Apple's upcoming products might not be the most revolutionary products and might not create as much hype as compared to the iPhone in 2007 but the products will be enough to get Apple back on the right track, at least for a few more years.
Apple's latest trademark registration for the iWatch has received mixed opinions; however, I believe that the iWatch will have enough to attract loyal and potential Apple users. Sony already came out with its smartwatch, and even though it failed to create hype, Apple's upcoming wearable technology will definitely be one of the next big things.
Rumors of a cheaper iPhone have been around for quite some time now, and it is more likely that the company will finally come out with a low cost iPhone before the end of the year. A cheaper iPhone will expand Apple's customer reach by a massive proportion as there are still a lot of fans who can't afford the company's products. Sony, Nokia, Samsung and even BlackBerry have different types of smartphones targeted towards different people. This is one of the keys in targeting a massive target audience, a place where Nokia has previously excelled.
While Apple still hasn't revealed anything on a larger iPhone, hopefully 5 inches, it is again likely that the company will finally release an iPhone in the "5 inch" phone category. Even the a bigger iPhone would mean a late entry into the phablets market, it is likely to make a major impact after its release. Samsung and Sony have already released their own super-sized smartphones, with Sony's 6.4 inch smartphone due before the end of the year. Nokia and BlackBerry, on the other hand, also haven't adapted this particular segment, which is one of the reasons for their struggle.
Aside from that, an iPhone 5S or 6 is already in the works and if Apple's iOS 7 can become successful, then the company might finally be able to improve its market share, after losing out to Samsung in the last couple of years.
Even if Apple is not the company that it used to be, the company still has a lot in its bags, especially in 2013. Tim Cook's appointment might have left many people disappointed but if Apple can release a few new products in upcoming quarters, then I don't see a reason why Apple's shares can't go back up the $700 mark. The company is far from over and Apple is definitely a buy, at least as long as its shares are cheap.
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Yasir Idrees has no position in any stocks mentioned. The Motley Fool recommends Apple. The Motley Fool owns shares of Apple. 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!