What Can Apple Do To Woo Back Investors?
With Apple (NASDAQ:AAPL) falling for the third straight day on Friday to be down almost 15 percent since the start of the year, the question being asked is: Just what do the company’s investors want?
The price of the shares has continued to fall since Apple posted earnings of $13.1 billion, or $13.81 a share, on sales of $54.5 billion on January 23. It was the fourth-largest quarterly profit ever by any company, but clearly wasn’t not good enough for the growth-hungry investors. Concerns have also increased because of Apple’s own assertion that its usually low guidance, which has been considered conservative, would get more realistic from now.
But the biggest concern being collectively expressed is about innovation. Apple, known for turning several industries on their head, is suddenly in a position where its products are being called boring and unexciting.
As Jeffrey Gundlach of bond firm DoubleLine Capital told Reuters, Apple now has plenty of legitimate competitors and needs to do more to stand out. “You can’t just keep rolling out iPhones and iPads and think that everybody needs a new one,” Gundlach said. “The [iPad] mini? What is that all about? It is a slightly smaller iPad — so what? So that is our new definition of innovation?”
According to CNBC’s Nicole Urken, investors don’t want Apple to become a “legacy of the past” or to lose out to its many rivals in the innovation game. “So what do investors want to see from Apple?” she asked. “Innovation — revolution not evolution. And putting its $137 billion of cash (which it is getting minimal credit for) to work.”
With Samsung biting at Apple’s heels, questions of pricing power and the product cycles have also come up, Urken said. And all the concerns for the future have eventually resulted in the basic nature of the stock being altered.
“As the perception of Apple shifts from a ‘growth’ stock, which growth funds came after hand over fist, to a ‘value’ stock, is Apple now an opportunity?” she asked. “Put simply: At these levels, there is no doubt Apple is a compelling value for the stock trading at 10 times forward earnings with a stand-out balance sheet, strong product cycle, and enviable ecosystem of products. But with no catalyst right here, the stock is likely to remain in a trading range in the medium-term.”