Cramer: Apple’s stock will continue to struggle until one of two things happen

CNBC’s Jim Cramer says Apple’s stock will continue to struggle until one of two things happen: iPhone sales pickup or growth in Apple’s services business are what can set the stock back on its course.

As long as iPhones make up more than 60 percent of Apple’s sales, Wall Street will only care about the razors, not the razor blades.

That’s wrong. But, that’s why I expect Apple’s stock will stay mired at this level either until the phone biz picks up again or the services business grows to the point where it can no longer be ignored.

You won’t be paying 153 bucks for this stock when that happens, you’ll be paying well in excess of these levels when the services revenues finally cross over to be the main thing we talk about when we talk about Apple. — Jim Cramer

Direct link to video here.

MacDailyNews Note: Apple’s Services generated over $10.8 billion in revenue during the holiday 2018 quarter (fiscal Q119). Apple expects to report total revenue for the quarter of “approximately $84 billion.”

28 Comments

      1. If you invest in a cow, your investment will never grow, because the cow cannot grow. The market cares about growth. A cow can only give so much milk.

        This is essentially what Cramer is saying. Since the iPhone is more than 60%, way more than 60% of Apple’s sales, and that market is pretty much saturated, Wall Street sees no growth potential in Apple. They pulled back on Apple out of caution, after Apple said “Oops, we didn’t sell as many iPhones as we thought we would.”

        That signals growth is slowing. So if you’re an investor and not a fan boy that says move your money somewhere else where growth is more likely. So there’s a sell off and the price drops.

        This doesn’t mean Apple is going out of businesses. They could sell cooler and better iPhones for eternity but they won’t be growing much. Not with the way they’ve done things in the past.

        The advent of “5g” will probably cause a spurt in iPhones, but Wall Street might be “taking that into account already” or “factoring that in” as they say.

        So Apple needs another product that signals growth potential to Wall Street. Apple says services. Apple’s services have been growing. The funky thing about Apple’s services though is that they are tied to Apple’s products, chiefly the iPhone. So while services are growing, the question is what if the engine that pushes services is slowing down.

        There are those who say services drive the sale of the devices. I have never met a single person who bought an iPhone because of services. Let alone a Mac or iPad or Watch. They buy the product, then discover the services. When I buy a Mac it isn’t because of ApplePay or iCloud or iTunes. I can find those services elsewhere, and get better services. iCloud for instance. Dropbox and Backblaze and Proton Mail and Amazon and it’s all cross platform.

        1. I would love for Apple to start a secure social network and search engine that doesn’t monetize user data. I think a lot of facebook and google users would ditch “free” services for quality, privacy protecting options at a reasonable price.

      2. See…
        It’s a problem with Apple, especially earlier on.
        When flip phones had 4g, the original iPhone launched with Edge.

        Bluetooth keyboard were all over the place for pdas, but Apple didn’t have the bt profiles, and even worse, no one else could code for one. It was forbidden.

        Then they start adding, years later, one (or few) at a time, features that were ubiquitous. NFC, better bt, more current cellular, requiring new devices each time. They could have been more broadly combined?

        Apple repairs.. another issue.
        No SD… guaranteed obsolescence.

        I can go on. Notice, no mention of Wall Street. I’m a customer and they milk us.

    1. Everybody is missing the critical point with this particular downturn:

      THIS TIME COOK PUSHED THE LIMITS OF WHAT EVEN LOYAL FANBOYS WILL PAY.

      It’s all down hill from here, because just like we know the scorpion will sting the frog while being carried across the river, Cook will continue to raise prices without innovation, will continue to fall behind in key markets, and will leave Mac products to langush… because it’s simply in his nature. Getting rid of Cook is a necessity NOT an option.

    1. This is just silly – “one trick pony” – Really? Maybe you’ve heard of the Mac, or the iPad, the App Store, iTunes Music Store, and the afore to mentioned $10B in services revenue. Pull your head out this is just all a big bunch of “nothing” as Wall Street continues to figure out how to make Apple dance to its tune so these “investors” can figure out how to tear the company apart and profit greatly from it. As I get older the games that are played have become much more clear. Again companies miss revenue expectations all the damn time. This is just news because 1) Apple hasn’t done it in 15 years (which is unheard of) and 2) Apple has always refused to bow to Wall Street and do “as told”. Wall Street is trying to assert dominance to get Apple to “get into line” and support their profit extorting ways.

      1. @ Tom:

        the iPad is the iPhone. Zero real capability difference, same app store.

        Apple is so proud of its “Other” products that it refuses to break out profits for them in its annual report.

        The Mac has been relegated to last place in Cook’s development priorities, and it shows. The hardware and the software for Macs has fallen dramatically behind the Windows competition in the last 7 years — and that’s before you factor in the massive Apple price increases. The lack of Mac functional and efficiency leadership is objectively proveable if you were willing to do an honest comparison.

        The bloated iTunes is weak, Cook hasn’t improved it at all.

        $10B services is music rental and insurance for non-repairable Apple hardware. Those service revenues would dry up as soon as Apple hardware sales slide .. which is exactly what is happening.

        I agree that Cook shouldn’t dance to please Wall Street. But his recent media tour to blame China and everyone else for Apple’s lack of product leadership is quite pathetic. Apple should never rely on any one country or any one product for 50+ % of its profits or production. It shouldn’t go 5 years between product updates. It shouldn’t lay in bed with its direct competition and it shouldn’t let other companies create whole new market categories while sitting doing practically nothing to challenge them. That is pure stupidity.

        It has been almost 6 years since Apple released its flagship trashcan Mac Pro. That is symbolic of Apple not caring about its existing users while it attempts to corral millenials with emoji and music rental.

        Apple Computer is dead.
        Apple Fashion Mobile Electronics Rental R-Us is what Cook has created.

    2. This has nothing to do with customers or what we want.
      The price of Apple stock is at the whim of Wall Street stock manipulators and what they need to happen in order for a few very rich people to maximize their return on investment.

    1. You mean like we used to have for Siri, Maps, FCP8, a timely configurable Mac Pro pros actually want to buy, a new Apple monitor, a new Apple branded WiFi router, etc. before those were dashed on the rocks of indifference and incompetence? I hear yah.

  1. I’d love to see Apple become the one ecosystem to rule them all, such that Hulu, Netflix, and all the other original content producers join hands under Apple which would provide the single-log-in, single-subscription portal, so we wouldn’t have to have separate accounts and billing for each one. I’d pay more than the sum of all those fees to have all of that consolidated into one space, if it was combined with all of Apple’s other services (iCloud, etc.). Not gonna happen, though.

    1. It seems we’re headed NOT toward “one that rules them all” but many many protective media fiefdoms with delusions of greater grandeur and just slices of the bigger pie. Thus making access a PITA.

      1. Indeed. As all of these other streaming offerings have started to emerge alongside Netflix (and we ain’t seen nothin yet), I find myself increasingly buying seasons on iTunes.

        I think we’re going to be in for a decade of “streaming wars” that will be frustrating as consumers. I hope Apple’s solution is either broad enough to work for me, or some kind of big tent approach nesting other streaming service into it.

    2. You mean similar to what Amazon has already done with their “Amazon Subscriptions” under Amazon Video? Single login and a single index to search the contents of all the video services you subscribe to through Amazon?

  2. Since the passing of Steve Jobs, we have watched as Apple slowly loses the clout it once had. If it doesn’t come up with a new technology, I’m not sure it can overcome this.

  3. Apple should have realized their iPhone business was about to hit a major wall in sales and that jacking up iPhone prices was not a long-term solution. Apple should at least put some effort into either maintaining or growing iPhone market share. Installed base is nice but investors expect both yearly sales and installed base to grow. Tim Cook seemed so surprised when he talked about China iPhone unit sales falling off a cliff. Almost everything Apple was doing with iPhones was making them less affordable to the masses, so it shouldn’t have come as a shock to him consumers wouldn’t be rushing out to buy new iPhones.

    At least, in theory, Apple needs one low-cost iPhone to sell to emerging nation consumers, so Android smartphone manufacturers won’t capture 99% of any particular emerging country. Apple seems to be ignoring poorer people completely. I would think Apple should be able to afford some loss leader iPhone to keep unit sales at a certain level. It should be better than selling zero iPhone units.

    1. Exactly. I never really cared about a low cost iPhone but it seems like you’re right at this point. A low cost, but somehow sexy device. I thought that they had it with the XR but I guess it is still too expensive.

    2. Installed base = potential consumers of Services. If Apple continues to be satisfied with a minority market share in units it directly affects their plans for having the base to grow their Services revenue. Unless that is they keep going with the same plan and increase pricing each year like they have for devices.

  4. Cramer is spot on which is why I am simply stunned in recent years that Apple has been so slow preparing itself for iPhone maturing for in all honesty I expected it to happen a few years back and in truth only the X models gave that extra boost at that time because they seemed something new and desirable. Now that they are the norm that boost is likely over.

    So why was iPad ignored for so long and now playing catch up when all sorts of innovations could have been considered either earlier (Pro) or to extend the platform wider and more flexibly like interaction with the Mac. there even Samsung and Dell have gone further than a company that controls the whole thing and thus should be at the forefront of such things. Then there is HomeKit/HomePod again ignore for far too long or late to market while the market itself and the possibilities were never fully imagined despite possessing all the ingredients years before the opposition and not even responding to them in a timely manner. iPad was there to really exploit that market with a little imagination yet still is barely a consideration by the public at large in that function, being a low level add on instead of the centre of the process. A total lack of vision has allowed the situation where the iPhone is still 60% of sales and only now has the belated attention to services saved the day and even that will take a year or two assuming its growth is maintained.

  5. Wow so much Angst here! In a year or so, Apple will be just as strong and revitalized as ever.. Tim’s got too much pride, since it’s his baby now to lose. I promise he won’t let Apple, the company down. No one who really cares about Apple gives the stock geeks credit for anything except being “nervous nellies!”

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