Home > Apple Inc. (AAPL): Mr. Tim Cook Better Have A “Plan B”
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Apple Inc. (AAPL): Mr. Tim Cook Better Have A “Plan B”

February 19th, 2013

PlanAPlanBGeorge Leong: It’s difficult to believe that former Wall Street darling Apple Inc. (NASDAQ:AAPL) traded at a record high of $705.07 on September 21, 2012. Fast-forward five months and the stock has not been able to mount any sustainable rally since its high, as shown by the downward trading channel on the chart below. The $500.00 level will be tough to overcome, given its competition’s products and superior pricing, based on my stock analysis. Learn To Trade Like A Billionaire With My Free E-Book!

Apple’s stock chart clearly shows a trend reversal to the bearish side, according to my technical analysis. Failure to hold could see Apple fall to the low-$400.00 level.

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There are questions regarding the ability of CEO Timothy Cook to deliver the superlative revenue growth traders have been accustomed to in the past. The problem lies in the rising popularity of Samsung Electronics Co. Ltd., Google Inc.’s (NASDAQ:GOOG) “Android,” Research In Motion Limited’s (NASDAQ:BBRY) “BB10,” and Microsoft Corporation’s (NASDAQ:MSFT) “Windows 8” phones and tablets. (Read “Why Nokia Could Be a Moneymaking Investment.”) The competition is fierce, so Apple will need a “Plan B” according to my stock analysis.

For instance, some signs that something may be wrong at Apple include the company’s decision to cut the price of its highly anticipated “MacBook Pro” with retina display. Apple generally dictates the price of its products sold at the retailers, so the fact that Apple slashed the original $1,699 price to $1,499 may be a clue that the company is facing tough competition from less expensively priced, similarly configured laptops from its rivals, as my stock analysis suggests.

The slippage in Apple’s business is evident, based on my stock analysis. Apple shipped 14.6% of the total number of smartphones shipped globally in the third quarter, versus 23% in first quarter 2012; in comparison, Samsung’ shipments surged to 31.3% in the third quarter, according to International Data Corporation. (Source: Osawa, J., “Apple Cuts Orders For iPhone Parts As Demand Slips,” The Wall Street Journal January 14, 2013.) There is also speculation that Apple is cutting its orders for parts used to build the “iPhone 5” due to lower demand. Learn To Trade Like A Billionaire With My Free E-Book!

As my stock analysis suggests, based on Apple’s global market share and declining revenue growth, the company is in trouble. According to analysts polled by Thomson Financial, Apple is estimated to grow its revenues by 17% in fiscal 2013 (down from previous estimates of 22.2%), only to see revenues fall to a mere 13.2% in fiscal 2014. My stock analysis indicates that these are not growth metrics investors are paying for, and they pale in comparison to the company’s 70% and 80% growth in 2011.

According to my stock analysis, Apple needs to do something more than just launching new “iPhones” and “iPads” to drive revenue growth. There is speculation that Apple is developing a cheaper iPhone to be launched later in the year, according to The Wall Street Journal. (Source: “WSJ: Apple to build cheaper iPhone as smartphone dominance slips,” Apple Insider web site, January 8, 2013, last accessed February 15, 2013.) As my stock analysis notes, if this is true, this strategy would make sense for Apple, as the company needs to sell much cheaper phones in the emerging economies, eventually encouraging these buyers to upgrade to its more expensive products.

Samsung and Nokia Corporation (NYSE:NOK) are already selling cheaper smartphones in China; it’s not rocket science to surmise that Apple would follow suit, as my stock analysis suggests. The one main problem that I see is the price point for the cheaper iPhones. My stock analysis suggests that the iPhone would need to have a major cut in price for it to be competitive. My stock analysis indicates that Apple also needs to consider the margins for the selling price. If it’s too low, margin erosion occurs; too high, and no one buys.

The bottom line is: Apple needs to do something to drive new streams of revenues to help drive growth; otherwise, the company will be in trouble.

Related Ticker: Technology Select Sector SPDR (NYSEARCA:XLK).

This article is brought to you courtesy of George Leong from Profit Confidential.


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  1. Apple fan
    June 21st, 2013 at 00:27 | #1

    Great. When everyone thinks AAPL is doomed, that is when the stock has bottomed out. Any new fall products will put it to 500 due to the short squeeze.

  2. will i am
    February 20th, 2013 at 17:20 | #2

    Apple is not the same company without Steve Jobs they can’t innovate . Too funny. You guys should have sold AAPL at $700 like I did :)

  3. February 20th, 2013 at 14:49 | #3

    When he said “only to see revenues fall to a mere 13.2% in fiscal 2014″ he meant “only to see revenue GROWTH fall to a mere 13.2% in fiscal 2014″. What is so awful about 13% revenue growth?

  4. Ari
    February 20th, 2013 at 11:22 | #4

    It seems like every Tom, Dick, or Harry who lost touch with their mom, is blogging about how apple is doomed. Get a life, or at least do your own research. The number don’t lie, bloggers and analysts who simply mimic others do. I’m beginning to think these folks are getting paid to bash on apple or its somehow news if you talk negative about apple.

    How much faster and bigger must a company get? I mean really, it’s not enough to command the largest Q earnings in history. Seriously.

    Ok this is the research this author and all other should be doing:

    “According to the latest research from Handset Country Share Tracker (CST) service, Apple’s iPhone 5 overtook Samsung’s Galaxy S3 to become the world’s best-selling smartphone model for the first time ever in the fourth quarter of 2012. Apple’s iPhone 5 smartphone model shipped an estimated 27.4 million units worldwide during the fourth quarter of 2012. The iPhone 5 captured an impressive 13 percent share of all smartphones shipped globally and it has become the world’s best-selling smartphone model for the first time ever. A rich touchscreen design, extensive distribution across dozens of countries, and generous operator subsidies have been among the main causes of the iPhone 5’s success.”

    Additionally:

    “In addition to the iPhone 5, Apple shipped an estimated 17.4 million iPhone 4S units for 8 percent smartphone share globally in Q4 2012. Apple’s iPhone 5 and iPhone 4S are currently the world’s two most popular smartphone models.”

  5. Lokey
    February 20th, 2013 at 11:05 | #5

    Does the fact that AAPL is making money hand over fist relative to their competition and their products, proportionate to market share, are the most sought after on the planet mean anything to your analysis?

  6. fernando
    February 19th, 2013 at 20:22 | #6

    after reading this amazing article i get the feeling that apple is only a good stock if its revenues keep growing at a faster rate each quarter. apple needs to conquer the whole world otherwise the company has a big trouble. does anyone really believe in this? where is the problem??? i feel dam. why can’t I understand this???

  7. ARY
    February 19th, 2013 at 19:08 | #7

    t’s difficult to believe that former Wall Street darling Apple Inc. (NASDAQ:AAPL) traded at a record high of $705.07

    No, what’s difficult to believe is that the stock is not higher than than right now. With NO growth, a reasonable price for AAPL is $800. Add to that the $10/share in cash that the company is growing/storing, and the price should go even higher than $800. Apple currently has $146/share in cash.

    Come back to me when Apple has a real problem.

  8. Joe Investor
    February 19th, 2013 at 17:30 | #8

    So what does “your stock analysis” say again?

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