Apple Earnings May Push Investors Away
Apple Inc. (NASDAQ:AAPL) is set to release its earnings numbers for the first three months of 2014 on Wednesday after the market closes. The company’s stock has been one of the market’s most notable losers over the last couple of years, and investors are wondering when, if ever, the company is going to set itself on the right track once again.
The biggest positive surprise that Apple can deliver in its actual numbers is a better than expected number of devices shipped, or a better gross margin. These numbers are probably priced into the company’s stock already, making their appearance an unlikely driver of upward Apple trajectory. Many investors may sell out of the company if it fails to meet expectations this time around.
Shareholders Lose Value As Apple Buys Stock
Apple stock is the same price now as it was in March of 2012. The company’s shareholders have foregone 37 percent returns in the wider market in order to keep their money invested in the Cupertino concern. That was a bad decision in retrospect, and there is no guarantee that the situation will get better going forward, despite what the analysts think.
As the leader of the smart phone industry Apple is in a strong position to continue to make a substantial profit. The company is even likely to grow that profit at a moderate pace over the coming decade. The smart phone hardware business that made the company is no longer a source of growth in general, however, and that means that Apple is unlikely to grow in value off of the back of it.
Apple has been pursuing an aggressive return of value to shareholders over the last two years. The company has regularly increased its relatively new dividend, and the return of value has, without a doubt, augmented the value of the company’s stock. Unfortunately, the price of the company’s shares has fallen drastically since the highs of September 2012, and they show little sign of regaining their previous lustre.
Bad Earnings Will Not Be The End For Apple
If Apple produces worse than expected numbers on Wednesday it will not be the end of the world. The company is still the biggest winner from the smartphone market in any given period, and that business is not going away. What is going away is the prospect of growth from the iPhone 6, but that shouldn’t worry investors unduly.
Buying into Apple for growth shouldn’t mean expecting the iPhone 6 to sell 200 million times. It should mean an expectation that the firm can create a new area to grow in. That area may be payments processing or wearable technology, but it will give the company room room to grow.
Investors who think that Apple is able to expand its iPhone profits will likely be disappointed by the numbers in tomorrow’s report. The intelligent investor, however, knows that the smart phone industry isn’t the one to plunder for growth. Whether Apple can turn its efforts to other areas, and meet success, is a matter of market determination.
Disclosure: Author represents that he has no position in any stocks mentioned in this article at the time this article was submitted.