Developing world sales potential coupled with the doyen of design teams suggests investors have gone sour on Apple far too soon.
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Apple, one of the greatest growth stocks that markets have seen in recent years has soured over the last six months, falling from highs of just above $US700 last September to recent lows of $US450.
As Warren Buffet has said many times, "be greedy when others are fearful, and fearful when others are greedy". With the stock down more than 40 per cent from its high, it’s beginning to look interesting from a buyer’s perspective once again.
There’s no doubt the growth within the company has slowed, but does it justify a 40 per cent-plus fall in the share price? And just because it is yet to announce another hugely disruptive product or deploy its reported $US150 billion cash pile doesn’t mean it won’t.
Personally, at these prices I think it’s a pretty brave game betting against Apple and the incredible team of innovative personal they have built over years, even without its late-illustrious leader.
One of the big issues over the last six months has been the growth in Samsung’s market share of the smartphone market to become the biggest player. This seems to have worried a lot of people. However, looking at it from a slightly different perspective, we must remember that it probably doesn’t matter if Apple plays second fiddle to Google; it didn’t seem to hurt them too much when they did the same with Microsoft.
There is a big difference between market share and profitability and if there is one thing Apple has, it's profitability. And to maintain its profitability, it doesn’t need to steal market share as the bulk of its profitability comes from existing customers that aren’t about to give up on Apple any time soon.
As the world opens up and more and more people move into the middle classes, Apple will continue to gain customers. Smartphones might be very common in developed nations but from a global perspective, there is a huge way to go before the market is anywhere near saturation. If rumours prove correct of a cheaper iPhone aimed at the emerging markets, then we could very quickly see a rebound in Apple smartphone market share.
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In the above chart, we can see that the market's view of Apple has changed over the last few weeks. The stock has found significant buying support around the major support level of $US450 which has seen it bounce enough to break up through the medium-term downtrend line, which indicates a significant slowing in downside momentum. We’ve also seen the stock close above the 50-day moving average for the first time since September 2012, which is another encouraging sign.
Given Apple’s knack of coming up with revolutionary products, I think it’s time people stood back for a moment and considered the various revenue opportunities available to the company. Apple around $US460 per share represents a great buying opportunity in my view, with minimal downside risk given the significantly lower expectations going forward.