Apple struggling to find a second act


Apple’s decline in stock value has resulted in a share buyback program. But does one bad year spoil the whole company’s future?

Apple is one of most widely held stocks today. They’re our generation’s version of GM, once the most powerful and respected company in the world.

As of late, Apple was the world’s most important company. But not anymore. They have had a huge decline in share price from around $710 to $400 and change, after dropping into the upper $300s. And that’s just over a 7-month period.

Apple just reported their latest earnings and they’re good, but not great. And this is a company that is a great company. But they’re not the growth company that they were. The pipeline of ideas for future growth is not there.

The base they’re at is so large that they can’t continue that growth story. The iPhone has been a huge hit in the U.S., but it’s outsold by as much as 4:1 or 5:1 by Android around the world.

In the U.S., Apple is still gigantic. Around the world, they’ve sold 37 million iPhones in just the last 90 days and just under 20 million iPads.

At the same time, Apple is sitting on more cash than just about anybody else. So over the next 18 or 19 months, Apple will buy up shares with $100 billion in cash. So they are transitioning as Microsoft once had to do. They’re still an exciting company, but they’re not who they once were.

As for owning stock in Apple, if you own mutual or index, you probably already own shares.

When a company like Apple becomes part of the culture, people buy a stock because they love the products and the cult-like feel around those products. But that’s not a good reason to buy stock. You should buy stock based on its ability to generate further earnings in the future.

Buying Apple is often an emotional choice. Be careful that emotion doesn’t get the best of you.


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