For years, Apple Inc. (NASDAQ: AAPL) was arguably the greatest company in the world. It had the highest market cap, which reached almost $3 trillion. Its revenue rose by double-digit percentages. Its stock price increased almost 300% in under five years. The iPhone became the dominant smartphone in the world, and Apple sold over a billion of them. It revolutionized the smartwatch, and Macs are still considered the personal computing gold standard. The shine is off some of these accomplishments though.
Apple’s stock has sold off 12% in the past six months, while the broader market is down just 3%. Apple has struggled with its huge manufacturing facilities in China. This is not entirely Apple’s fault. Some of the problems were due to the COVID-19 pandemic. Apple has tried to relocate some of its manufacturing to India, but that effort has been difficult.
In its most recently reported quarter, revenue dropped 5% year over year to $117.2 billion. Per-share earnings dropped from $2.10 to $1.88. iPhone sales were poor, and revenue generated by the smartphone fell from $71.6 billion to $65.8 billion. (Click here for the 21 companies making the most profit per second.)
There are rumors, with some support, that sales of the new iPhone 14 have been weak. It may be that people are tired of upgrading every year. Are the features of the iPhone 14 really better than the iPhone 13? Almost certainly not for most people. This means the annual upgrade cycle may be in trouble. And this cycle is at the core of Apple’s revenue.
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Where does Apple go from here? It has a huge and growing services business. This includes several operations, such as cloud storage, payment systems, music, video and its huge app store. This business is somewhat dependent on the growth of its installed base of hardware. That may spell trouble.
Apple is not the sole large smartphone company. Samsung continues to be a massive competitor. Google will not give up on its Pixel product. In China, Apple has several large, entirely local competitors.
Apple was the greatest company in the world for years, but it no longer is.
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