“Despite rallying on Wednesday, shares of Apple are still down more than 10% since the company reported Q3 earnings last month,” Adam Levine-Weinberg writes. “Ironically, this comes even as analysts have increased their estimates for Apple’s FY15 and FY16 earnings in the past few weeks.”
“Pundits have laid out a variety of explanations for why Apple stock has suddenly lost steam. Many point to tough sales and earnings comparisons in the coming year. Others cite weakness in China’s economy. Worries about Apple Watch demand have been another common refrain,” Levine-Weinberg writes. “However, all of these issues ultimately boil down to one key concern: that Apple is not a growth stock anymore. And the bears are half right. It’s probably true that Apple is not a growth stock anymore — but it’s not true that this is a concern. It just means that there could be some short-term dislocation as the investor base shifts from growth-oriented investors to value investors.”
“Apple’s sales rose nearly 30% year over year through the first three quarters of FY15, putting Apple on pace for more than $230 billion in annual revenue. EPS rose at an even faster 44% pace,” Levine-Weinberg writes. “Given these outrageous growth figures for what is already a massive company, investors don’t have to “worry” about whether Apple can maintain that growth rate. They can be certain that Apple cannot maintain that growth rate.”
“That doesn’t mean all is doom and gloom for Apple stock, though,” Levine-Weinberg writes. “While growth investors are heading for the exits, it’s a great time for value investors to buy the stock.”
Read more in the full article here.
MacDailyNews Take: Regarding Apple’s growth prospects:
Apple’s iPhone 6/Plus penetration among iPhone owners is a mere 27%. That means there are 73% primed for upgrading to the iPhone 6s/Plus. And, that’s not counting those fleeing from fragmandroid to quality in ever-increasing numbers. And iPhone has 99% user satisfaction. Every year or two, there are hundreds of millions of iPhone users waiting to upgrade.
Like PC sales, iPads have a far longer replacement cycle than smartphones, which turn over every two years (at most). Wholly unlike PCs. “iPad Pro” (likely) and, indeed, true iPad multitasking for iPad Air 2 and newer (also to debut this fall), await in the wings, with iOS 9 set to arrive in a few months. Older iPads need not apply of which there are hundreds of millions in use today. The first real round of iPad upgrades loom.
Apple Watch’s best month last quarter was the last month of the quarter, in June, as supplies finally hit stores and could begin to satisfy demand. Demand that is sure to grow as we approach the holiday shopping season.
According to IDC, Apple’s Macintosh has 13.5% market share in the U.S. and 7.5% worldwide. Apple’s Mac has outgrown the PC market for the last several years. Apple’s indomitable Mac has headroom of a mere 86.5% in the U.S. and 92.5% worldwide.
We won’t even get into Apple TV + Internet TV, Apple Pay, or Apple Music, much less Apple Car.