“After delivering blow-out returns to investors in recent years, Apple’s stock has had a rough past few months. Apple’s supposed decline is mostly attributed to the company’s maturing revenue growth due to the saturation at the top end of the smartphone market,” Dividend Pro writes for Seeking Alpha. “Analysts also contend that Apple faces pressure on its extremely healthy gross margins from increased competition with Google’s Android powered smartphones and tablets. Moreover, investors also fear that Apple has lost its ability to innovate after the death of the iconic Steve Jobs. All this has generated renewed pressure on CEO Tim Cook to come up with a strategy to revive Apple’s growth and speculation is rife that the company is about to launch a low-priced iPhone to grab a share of the huge mid to low-end smartphone market where Android powered devices from Samsung, ZTE and Huawei dominate.”
Dividend Pro writes, “Many analysts have touted the launch of such a device as inevitable given Apple’s recent woes combined with the charm of the potentially huge market. However, in my opinion Apple will not launch a low-priced smartphone, and if it does, I would be the first to sell my long-term holding in this stock… I’m sure that Apple’s management has done a complete and comprehensive analysis of the pros and cons of introducing a low priced smartphone and has very actively decided against it so far. The company does not need all the sell side analysts thrusting the company’s management to make what according to them is an incontrovertibly right decision by launching a low priced iPhone. In my opinion, the economic incentive to go for a low priced iPhone is generally overstated and is actually very small.”
“The only reason Apple will succumb to such pressure is if the management really feels that its existing strategy of growth in high margin products through consistent innovation has started to fail and Apple does not see its R&D efforts bearing fruit to introduce viable and innovative products (like the expected iWatch) in the intermediate future,” Dividend Pro writes. “To me, such a move would finally signal the end of an era of innovation by a great company which would then be forced to resort to blindly chasing market share of a mass-produced commodity just like every other company. This would be the time I would sell Apple.”
Read more in the full article here.
