Are Apple's Growth Days Over?
- By Naman Shukla
Samsung (SSNLF) and Apple (AAPL) are the top two players in the smartphone industry followed by Huawei. Currently, Samsung holds 20% market share, whereas Apple is substantially behind Samsung at 12.5%.
Apple recently launched its new iPhone 7 models, but it seems like iPhone sales have already peaked in 2015. This year, the company sold 211.88 million units, down from 231.22 million units sold in the previous year.
Warning! GuruFocus has detected 7 Warning Signs with AAPL. Click here to check it out.
The intrinsic value of AAPL
The most important thing to notice is that 2016 has been a transition year for the company, as its iPhone sales declined for the first time since 2007.
In the fourth quarter, the company reported EPS of $1.67, beating the analyst estimates by just 2 cents. On the other hand, the company's revenue came in at $46.9 billion, beating the analyst estimates by $10 million. That figure represents a drop of 8.9% year over year.
A look at the prior year clearly suggests that Apple's revenue has been declining, not at a rapid pace, but it's not a good sign for the company's future.
Samsung also launched its latest flagship phone, the Galaxy Note 7. But, due to some major issues found in the Note 7, Samsung was forced to terminate its production, which was obviously an enormous advantage for Apple. However, Samsung accepted the mistake and it looks like it won't repeat the blunder again.
Let's assume if the Note 7 would have been a popular smartphone, then it is certain that Apple would not have even sold 211.88 million units this year.
Apple's MacBook Pro is now facing tough competition from Microsoft's (MSFT) Surface. Microsoft detailed that a large number of MacBook users are jumping to Surface than ever before. Moreover, Microsoft has been running several bundles as well as promotions via retail channels worldwide, and it is paying off in the middle of the holiday season.
Microsoft has been pursuing Apple users with a MacBook trade-in program, proposing up to $650 in credit that can be applied toward Surface devices. This helped the company to gain a large number of MacBook switchers.
Conclusion
Apple was down approximately 4% in 2015, but the stock is up 10% year to date. Apple is still heavily dependent on its iPhone sales, which continue to underperform. Luckily, the company gained huge advantages from the Note 7 disaster this year, which might not happen again.
Apple currently holds 12.5% market share globally. To capture additional market share from its rivals, it is essential for the company to bring innovation in its products. Until Apple does this, investors should avoid the stock.
Disclosure: I do not hold positions in the stocks mentioned in the article.
Start a free seven-day trial of Premium Membership to GuruFocus.
This article first appeared on GuruFocus.
Warning! GuruFocus has detected 7 Warning Signs with AAPL. Click here to check it out.
The intrinsic value of AAPL
