It’s inevitable. Thanks to the theory of ‘what goes up, must come down,’ sooner or later Apple will falter and stumble, leading to a stock crash thanks to sales and profits that don’t even meet Apple’s own conservative guidelines.
Gloom and doom? Nope. Math. What goes up, must come down, and it’s unlikely that every human on planet earth will one day own an iPhone, and if that did happen wouldn’t that be the saturation all the doomsayers are warning against?
Don’t get me wrong. Apple is in no danger. Even if iPhone sales dropped by half, thanks to the company’s greatly grossed out margins, Apple would still make more profit than all other manufacturers combined. Yes, Apple is doing that well.
But sooner or later there will be a saturation of sorts, a year when iPhone sales units don’t grow in number, perhaps contract a little, maybe even drop substantially, the result of competition and market segment penetration (to the point where everyone who wants an iPhone has an iPhone, and the product lifecycle upgrade path is diminished). We see something of the same thing has occurred already with the iPad. The first three years the iPad’s sales were enormous, growing far faster than even the iPhone in the early years, but then it hit the skids.
The dangerous combination of extended product life cycle combined with the trend toward large screen smartphones combined with a feature set that was and is not sufficiently compelling to stimulate additional sales. Oh, and technology gadget fatigue. Some of us are just tired of managing so many Apple devices (Mac, iPhone, iPad, Watch, Apple TV et al).
To be fair to Apple, the stock market seems to like fast growing, rapidly expanding companies, and other than the iPhone what has Apple done for the market lately? Sure, Mac sales are at record levels, but that’s antiquated technology by market standards. Apple TV hasn’t caught on with substantial penetration. iPad sales are drifting downward. Watch is an iPhone accessory, thereby limited to expansion. Apple has done a great job milking every aspect of the company’s multitude of business lines, but soon or later, the cash cow, the single product which identifies the company to more customers and investors will falter; sales growth will fall, actual sales will fall, and that’s when we’ll find out that Apple’s stock is not all that resilient despite a crazy P/E and enough money in the bank to buy France.
If growth and expansion is what the stock market likes then it’s somewhat easier to see the disappointment reflected in the current AAPL price because Apple’s revenue and profit growth, while substantial, remains organic and deeply tied to the company’s broad ecosystem.
What can Apple do?
A car wouldn’t hurt, but automobile manufacturing isn’t Apple’s current forte, and the industry, while doing well this past year, isn’t exactly known for the kinds of margins and mass quantity sales that Apple adores. The company could afford to buy Tesla but not Toyota. A fleet of self-driving cars has a certain allure but Apple’s history indicates it will wait until someone else gets the business segment started before jumping in and showing the world how it should be done.
To date there doesn’t seem to be much going on with HealthKit and HomeKit and Apple’s streaming television service is sitting in a closet somewhere because the industry that Steve Jobs famously once said was cracked, has turned out to be tougher nut to crack years after his admission and death.
That’s why I fear for AAPL’s future. Not the company. The stock. I’m a student of history and a believe of ‘what goes up, must come down.’ Name a company that has not suffered such a fate. Apple faces two questions. When? And, What will Apple do to prevent it?