Apple – why the sudden antipathy?

In our industry the biggest game is “expectation management”. Apple was in big news last week after its earning report. In the latest quarter, Apple topped $50B revenue, an increase of $8.2B from the same period last year. This should be the envy of any company. It sold 48m iPhones, more than any competitor can dream of. As Mike Moritz wrote in the Financial Times yesterday, if Apple were a nation, it will rank 45th. in the world, ahead of Pakistan and New Zealand. Suddenly the sound-bytes by the analysts showed disappointment that Apple only grew “18 percent” and management was forecasting slower growth. The stock was pounded and went down to sub-$450 range.

There is such a herd mentality. When your quarterly revenue reaches $50B, growth at double digits become very hard. Look at Microsoft, Cisco, and IBM in the most recent fiscal year – 4%, 6%, and -2%. But Apple is supposed to defy the laws of gravity, according to our financial pundits! Mike says very colorfully that Apple grew by 45% for last 5 years and if that rate continues, it will hit $3 Trillion by 2020. At 5%, that number will be $231B, and at 10% it will be $334B in 2020. No company in history has seen such kind of numbers.

Besides the numbers Apple has unleashed an energy unseen anywhere. It’s superior design, great retail experience, and impeccable supply chain management are the envy of any company. We have not even talked about the hundreds of thousands of application builders on iOS. Just the ecosystem of Apple is unprecedented in its size, scope, and influence.

During the CES week, I got tired of so many booths selling Apple gear, mostly from China. iPad/iPhone covers and accessories took up entire floors at the Las vegas convention center. Paradoxically Apple never shows up at CES in terms of a booth or its executives in speaking slots.

I believe Apple stock is a strong buy at the current price.


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