A turning point for Apple?

The standard-bearer for innovation is challenged by executive departures, intense competition and product setbacks.

By Stock Traders Daily Oct 31, 2012 1:10PM

The Apple Inc. logo is displayed on the back of the new MacBook Pro David Paul Morris/Bloomberg via Getty ImagesI have often been a little early in identifying major turning points in the market or individual stocks. I recently went through this with a client and realized that although our trading models are quite precise, my timing of major market-moving events or company transitions was almost always a few months early. One might argue that being ahead of the curve allows you to prepare for what lies ahead, but Wall Street is very shortsighted and, unless your words turn out to be right tomorrow, some investors will be dissatisfied.  

 

My past recommendation for Apple (AAPL) is a case in point. I have warned about competition, the challenge of innovation, and margin pressures. Now I have another concern. When major executives leave a company they may be doing so because there are more attractive opportunities elsewhere. Apple had an amazing run and the best minds wanted to be part of it, but the company has made some very bad decisions recently and is losing traction. This is exactly what I warned about months ago.  

 

It doesn't matter who you are, how big your company is, or the reputation you had yesterday, when you sell into a consumer market you are subject to the fickle nature of consumers themselves. Just like the market, consumers are all about what you did for me lately, and many have reason to be disgruntled with Apple. The maps issue and the restriction on YouTube are just the tip of the iceberg, because many people feel as if Apple will soon try to monopolize everything; no matter how cool a product looks, anyone who feels restricted will not be happy.

 

Of course, improvements can be made and restrictions can be lifted, but the fickle nature of the consumer and intense competition make it very hard to maintain the growth rate Apple has realized unless the company offers a product that is almost perfect. Instead, we are seeing key executive departures, fierce competition and product setbacks. This could mark a turning point for Apple. What I predicted is now transpiring. While I was a little early, I was not wrong. Apple is not the company it once was, and its growth rate will likely decline substantially going forward.

 

I am concerned about Seagate (STX) as well as Apple, because without these two companies the information technology sector only grew by 0.53% in the second quarter. If Apple and Seagate (which was directly influenced by Apple) don't perform, the entire sector is going to get hit. That means beware of XLK (XLK), the technology exchange-traded fund, too. There are better ways to make money in this market. 

 

8Comments
Oct 31, 2012 1:59PM
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I understand why the author did not sign his name to this article. 
Oct 31, 2012 3:47PM
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Apple has great products that are simple and well built. The problem with Apple products is that you are restricted to the "Apple Bubble". Technology changes almost daily and I think alot of people are becoming tired of the restrictions by Apple. Why should I have to "Jail Break" my phone to do something thats standard with an Android based phone. Samsung has started to blow Apple away with the Galaxy Note and Galaxy S3.
Oct 31, 2012 3:35PM
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How many months ago did you warn?  What was the stock price then?  Were you warning when AAPL was at $336?  If so, you sucked.
Oct 31, 2012 8:32PM
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If anything, the executive mix-up shows that Apple is actively working to stay on their toes rather than sit and stagnate.  Companies that do that succeed...companies that don't end up like RIM.
Oct 31, 2012 4:14PM
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Apple will hit $700 in 2013.  I had a sale trigger at $600.  so I sold half my shares.  Warning Nov. 1, 2012  I will buy back my shares at $580.  If Apple never hits $580... I told you so.

Apple is more than just I-phone and apps.

 

 

Oct 31, 2012 4:13PM
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Google innovates and reinvents over and over again, its what they do best... slowly but surely they keep innovating and becoming better.. google is NOT about one man, its a brand that relies on  many people.. Apple was single focused and its success was tied to one man!
Oct 31, 2012 4:10PM
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Jobs WAS apple, it's success was pinned to one man. Its success was pinned to being the best of the best. No prudent business ties their hopes to only hitting home runs... to hit it out of the park, again and again is not feasible... their balloon has to be deflated, and brought down to reality.

 

Apple will not continue  in its leadership position. There are too many hungry competitors out there...

 

 

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