Apple reported record revenue and profits. Again. And AAPL dropped like a rock on the market. Again. Is there anything good to take from all this?
Investor Carl Icahn took a bath on his AAPL holdings. I don’t want to rejoice in the misery of others, but in his case I’ll make an exception.
Whether Icahn thinks Apple is still a growth story or not, his investment has probably helped to run up the stock in recent months, and despite the post-earnings downturn, his strategy is as obvious as a three-legged stool.
- Help to run up the stock price and cash out with a healthy return
- Sit on AAPL until the company hits another growth run with new products
- Squeeze Apple for a larger stock buyback and go home richer
Apple has hit a wall of sorts. When a company runs past $100-billion in annual revenue it becomes more difficult to grow by 10-percent a year, let alone the 25-percent that Wall Street charlatans prefer.
Therein lies Apple’s problem. Growth.
Forget the fact that Apple is wildly profitable, has trouble meeting new product demand, or that customers love both the company and their products. Forget the fact that Apple, even with enormously ridiculous buybacks, sits on over $100-billion. Forget the fact that Apple is highly diversified with multiple profitable revenue streams that are unmatched by any competitor (Mac, iPhone, iPad, iTunes, retail stores, app stores).
From my perspective, Wall Street rewards risk and growth and, at least for now, Apple is neither. The company is viewed as safe if not stodgy, predictable if not passive. How well a company is run or how much profit it can squeeze out of a product line is unimportant to the miscreants of Wall Street.
It’s all about growth and Apple isn’t growing as much these days. Still, it was good to see Icahn take a bath (although I’m sure he found the recent drop to be a buying opportunity, too).