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.
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.
Chart courtesy of www.StockCharts.com
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
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.
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
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. read more news click here