How times have changed. A few months ago I was at the receiving end of a steady flow of emails and comments from Mac fans confidently predicting that Apple stock was getting ready to top $200 a share.Today Apple stock is hovering at around the $90 mark.
So, what went wrong, and can Apple hope to turn things around?
First, what went wrong? Well, let’s begin by being realistic and acknowledging that times are tough all round. Financial uncertainty has driven stock prices down all round, and AAPL stock is no safe haven during the current storm. (Anyone who thought that stock in a company that sold expensive – and unnecessary – shiny gadgets would be a good place to invest during uncertain times was an iDiot).
However, Apple can’t blame all its stock woes on the credit crunch and sweeping fears of a recession.
As much as Mac zealots might find it hard to admit, Apple has over the past few years been steering itself into an awfully vulnerable position. What makes the company vulnerable?
Several reasons actually:
• The Apple that many people know and love is built around one person – CEO Steve Jobs. While I have no doubt that the company could function just as well without Steve at the helm, many think differently. Jobs’ has had health issues in the past, and any pessimistic news related to his current wellbeing (whether it be true or not) has an adverse effect on stock price. Since no one, not even the CEO of Apple, can get their hands on a certificate proclaiming immortality, Apple will continue to be vulnerable when it comes to the question of how long Jobs will remain at the controls of the company.
• Apart from the iPod shuffle ($49) and a handful of accessories, Apple has nothing to offer anyone with a hundred bucks to spend. When it comes to computers, unless you want the Mac mini ($599), you’re going to need a $1,000 (actually, $1,099) to get into the Mac owners club. The first rung to ownership of a Dell or HP or a PC from any other vendor is much, much lower than it is for Apple. When people start counting the pennies, the price gradient between a Mac and a PC is going to matter.
• Hype sells, but when times get tough, investors need more. Apple’s been riding high on the hype wave (and making it pay) for several years now. Investors know that Apple can perform well during good times, but that’s no big trick. The question now is can Apple deliver the record quarters during tough times. Given how Apple stock is currently performing, investors aren’t too sure that the Cupertino giant can deliver.
• Dude, the iPod horse has been flogged to the point where it needs a life support machine to keep it going. Pretty much anyone who wants an iPod already has at least one, and in many cases two or three. It’s hard to see where Apple can take the iPod beyond what it is now with the iPhone and the iPod touch. Maybe they can fit a waffle iron to it or something …
• While the iPhone is still quite hot, there are plenty of other companies releasing what they consider to be “iPhone killers.” Over the next year the iPhone is going to face some serious competition. Also, Apple needs to be worried about the direction that Blackberry is taking – the new Blackberry Storm is a clear sign that the iPhone has stirred up the fires of innovation at other companies.
• It was time for a stock price downgrade. Accept it. Even Apple co-founder Steve Wozniak believes that it was right.
So, what does Apple need to do to boost its stock price? It needs to get back to doing what it does best – innovate. There are plenty of markets open to Apple. For example:
• Tablet computer
• Games console
• Revamped Apple TV or media center
Another area that Apple could work on to improve sales is price. Apple has already made it clear that there will be a shaving of profit margins over coming months, something that strongly suggests that prices could fall.
I’m confident that we’ll see the bottom end MacBook and an iMac fall to sub-$1,000 levels over the next few months (possibly before the holidays).
STOP THE PRESS: The Inquisitr is reporting that an $800 notebook is coming really soon.
Overall, Apple is a solid company, and a big reason for the latest drop in stock price is due to investors having been suckered into the reality distortion field (the one aimed at consumers) and having crazy expectations as to what the company can deliver.
Tough times mean there’s no room for pie-in-the-sky dreams any more, hence the drop in price. Because of the fact that Apple’s stock was so overhyped I’m certain that stock price hasn’t hit the bottom yet (I think that it could go to low eighties, lower still if Apple posts a weak quarter), and it’s going to be some time before AAPL sees $150+ territory again.