Why It’s Too Soon To Hate Apple Inc.

If you avoid the hyperbole, there’s much to like about Apple Inc. (NASDAQ: AAPL)

| More on:

The content of this article was relevant at the time of publishing. Circumstances change continuously and caution should therefore be exercised when relying upon any content contained within this article.

When investing, your capital is at risk. The value of your investments can go down as well as up and you may get back less than you put in.

Read More

The content of this article is provided for information purposes only and is not intended to be, nor does it constitute, any form of personal advice. Investments in a currency other than sterling are exposed to currency exchange risk. Currency exchange rates are constantly changing, which may affect the value of the investment in sterling terms. You could lose money in sterling even if the stock price rises in the currency of origin. Stocks listed on overseas exchanges may be subject to additional dealing and exchange rate charges, and may have other tax implications, and may not provide the same, or any, regulatory protection as in the UK.

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More.

apple

Earlier this week Apple (NASDAQ: AAPL.US) revealed record revenues with 26 million iPads sold for the quarter ended 28 December. The release of Apple’s new range of iPhones also helped drive revenue up.

Despite this shares, in Apple fell almost 9% after the firm reported flat profits of nearly £8 billion. Investors were further discouraged by Apple lowering its 2014 sales outlook.

Is this the beginning of a lasting slide? In all likelihood that’s hard to fathom.

Turning things around

It’s not easy to make predictions about the tech industry. If you think back to when the iPad first launched people — myself included — bemoaned its apparent lack of functionality. “It’s like a laptop, but can’t multitask? Seems pointless.” It’s done quite well since.

More recently, Apple Maps has been an intriguing case. Its error-strewn unveiling saw the service behave freakishly, with London teleported to Ontario, a train station turned into a park while a small farm was designated an airport (somewhat precariously).

A year on from its disastrous launch, for which chief executive Tim Cook was forced to apologise, Apple Maps now has a user base of 35 million. Significantly, its competitor Google lost nearly 25 million mobile users in the US as a result.

As you can see, turnarounds aren’t without precedent.

How it’ll bounce back

Sales figures for the iPhone 5C were a disappointment. Launched in September last year, the phone offered consumers cheaper entry into the iPhone market, and received strong reviews.

Apple’s problem was that while it was the cheapest of the new iPhones, it wasn’t actually cheap, retailing for £469. The unwillingness of Apple to produce a genuinely low-priced offering for emerging markets was befuddling.

Speculation is that the company plans to release two new large-screen iPhones in 2014, while the iPhone 5C will be discontinued.

So what else for the future? Apple’s spending on research and development has nearly doubled over the last two years.

We’re likely to see new product categories as a necessity to keep investors on side. These may include an Apple TV, in a push from Apple into people’s living rooms, to counter the likes of the Xbox One from Microsoft.

Or perhaps 2014 could belong to the iWatch, which would be Apple’s first stab at wearable tech.

A new product could act as a catalyst to send Apple’s stock up again. This is an approach that has worked historically for the company. Based on track record, perhaps investors should give Apple the benefit of the doubt here.

Is Apple a buy?

The competition faced by Apple today is significant. Google is consistently increasing its market cap, which currently sits at $375 billion, and has come a long way in catching up to Apple.

It’s a possibility that Apple’s new products, the iWatch or a larger tablet, could be the next big thing. The problem is Samsung is already doing much the same in the wearables market.

Google, on the other hand, is pushing the envelope further, exploring ideas such as a self-driving car, while its giant cache of information is a commodity that could be more valuable than oil.

The disappointment on Wall Street might prove a good opportunity for someone canny. After six years of negotiations Apple finally struck a deal with China Mobile. This deal means that the iPhone is now available in 16 cities in China, rising to 300 by the end of the year.

You could use the 9% drop in price to pick up an undervalued share with growth potential. If you’re a contrarian investor, even better — no one likes Apple right now.

Should you invest, the value of your investment may rise or fall and your capital is at risk. Before investing, your individual circumstances should be assessed. Consider taking independent financial advice.

> Mark doesn't own shares in Apple. The Motley Fool owns shares in Apple and Google.

More on Company Comment

Hand of person putting wood cube block with word VALUE on wooden table
Company Comment

Value has been building behind the Diageo share price

Despite the business growing, the Diageo share price first reached its current level just over 19 months ago and hasn't…

Read more »

Older couple walking in park
Investing Articles

5 stocks to buy for high and rising dividend income

I can see a host of shares to buy on the FTSE 100 offering me exceptional levels of income. Here…

Read more »

Young mixed-race woman looking out of the window with a look of consternation on her face
Investing Articles

I don’t care if FTSE 100 shares fall further, I’m buying them today

I'm happy to go shopping for FTSE 100 shares today, even though I accept that they could have further to…

Read more »

Happy young female stock-picker in a cafe
Investing Articles

Rolls-Royce shares are down 18% in a month and I’m finally going to buy them

Investors who bought Rolls-Royce shares have been repeatedly disappointed, but I'm willing to take a chance on them before they…

Read more »

Storytelling image of a multiethnic senior couple in love - Elderly married couple dating outdoors, love emotions and feelings
Investing Articles

How I’d invest £10k in a Stocks and Shares ISA today

Now looks like a good time to buy cheap FTSE 100 shares inside a Stocks and Shares ISA. These are…

Read more »

Black father holding daughter in a field of cows
Investing Articles

Today’s financial crisis is the perfect moment to buy cheap shares

I'm building a portfolio of FTSE 100 stocks by purchasing cheap shares whenever I see an opportunity. There's a good…

Read more »

Long-term vs short-term investing concept on a staircase
Investing Articles

I’d buy Tesco shares in October to bag their 5.4% yield 

Tesco shares have fallen lately but I think this makes them attractively valued for a dividend stock I would aim…

Read more »

Young mixed-race woman looking out of the window with a look of consternation on her face
Investing Articles

I would do anything to hold Diageo in my portfolio (but I won’t do that)

Diageo is one of my favourite stocks on the entire FTSE 100 and I'd love to hold it, but one…

Read more »