Good points. Apple has its eggs in one basket. The iPhone like many smartphones can now only be incremental, so its losing the aura, as the aura played out in the past. The incidence of bugs and hardware issues is getting to be a feature. The 6 was a game changer, great sales, but it wasn't. many sales came from users going back to Apple as they finally have a proper sized phone, and Apple users who interrupted their upgrade path to grab one. Im sure the 6S series are down, a lot. The 7 will be thinner and lighter, and bendgate will probably become a reality rather than an artificially created news frenzy. If it loses the audio port, expect revolt. There isn't really a lot going for an iPhone now, its been done. Eggs in one basket allows you to excel if that egg is great, but when its just ok and fine, thats a while lot of risk. Computer sakes are steady, iPads are down, the Watch and Apple TV are mere drops. While there is inherently nothing wrong, the upsides don't now exist IMHO
If "smartphones can now only be incremental," then all the factors that follow are nearly meaningless. Once model-to-model changes become boring, brand loyalty becomes far more important. If the last iPhone was a satisfying product, you'll buy another. Add the ever-deepening and broadening infrastructure...
It's not that every Apple user has to be invested in every Apple product, but if one person loves their Watch, another is happy with Apple Music, another their Mac... you have a huge population of users who are not likely to change brands. That loyal customer base functions as an annuity. As long as nearly nobody leaves, any new products and customers added provide the necessary growth. And the world is hardly tapped-out for new iPhone owners, even if the USA and Europe are mature markets. Today China, tomorrow India, Indonesia, Brazil, eventually Africa...
The whole "all eggs in one basket" mentality is misplaced. There's this expectation that Apple's position is as fragile as Nokia's once was - one bad quarter, and someone else will own the business. What is missed in this scenario is that the move to smartphones was not a fad, it was an epochal change, both for the telephone and the computer. It merged the markets for pagers, cell phones and Blackberry into a single device, and added the flexibility of a general-purpose computer. The computing power made the smart phone camera competitive with the conventional point-and-shoot and camcorder. Music and video player, game console, ebook reader... you know the list.
Telephones are a necessity, and wireless-telephone-plus-computer turned out to be a home run combination. At this point, it's hard to imagine what new feature(s) could be added that would so change the fundamental nature of the device that the world would abandon ship for a new paradigm. Everyone is already doing voice control, which is the (necessary) replacement for the keyboard. Google Glass hasn't taken the world by storm. Next comes, what, bio-implants and direct mind control? Definitely not something that's just around the corner.
So what if iPhone becomes a stable business, rather than a growth business, so long as Apple continues to leverage its position to introduce new product categories that extend the ecosystem? Wearables, Home Kit, Health Kit, Car Play, Apple Music, Apple TV, Apple Pay... those are the growth markets of the future. All have far less penetration than iPhone, all have the potential to grow substantially before hitting their plateaus. None need to have universal appeal or usage to be a success. All reinforce the relationship with the core product, iPhone.
I certainly appreciate that it's impossible to remain a growth stock forever, and growth stocks are extra-sexy; a chance to make a fortune, rather than a steady living. But a highly-profitable, dividend-paying business that grows at a moderate rate is called a "Blue Chip," and there ain't nothing wrong with that.
If you look at Apple's historic P/E ratios, the market hasn't really considered Apple a "growth stock with a future" - a company expected to double and more on a regular basis (like, say, Google or Amazon that trade with P/E two and three times that of Apple, or some of the "next big things" that sell at ten times Apple's P/E). The P/E has remained in a fairly narrow range, often lower than that of the S&P 500, since before iPhone was introduced. The price rose in response to real earnings, and, at most, hopes for the next 12 months/latest model. The people who were most richly rewarded were rewarded
despite the market's overall expectations (as embodied in the P/E). When buying low and selling high, they weren't selling to speculators who had finally realized they might make a killing - they were selling to a market that was as skeptical in 2015 as it was in 2005. Their capital gains came from the company's actual performance. That is a damn rare thing in investing.
The skepticism is heavier now than it was six months ago, yet the fundamentals aren't likely to change anytime soon. Consider this; if the earnings advice Apple announced at the last quarterly conference call turned out to be dramatically incorrect, Apple was legally obligated to issue an interim update to those projections. They certainly would have known that more than a month ago - when all the "experts" were already convinced there was bad news ahead. Yet nothing was announced. Chances are, Apple will announce results that are consistent with Apple's projections (Apple is not responsible for the over-enthusiastic projections of others). It's only the projections for the upcoming quarter that are "in play." Is it at all likely they'll be worse than the market has already anticipated?
No, the future will be much like the past. The chorus from the "It's all over for Apple" crowd will continue to dampen demand for the stock. Apple "believers" will continue to be rewarded solely for Apple's actual performance, and punished whenever the non-believers think they smell blood. The believers will never see the price go up simply because the non-believers finally see the light - by definition, the non-believers will never see the light.
