Apple as corporation has liftoff and now is entering an orbiting phase of its life cycle which will eventually lead to a decaying Orbit.
The belief that Apple’s stock is undervalue due to future earnings potential in foreign lands is a deception which will soon be revealed due to market saturation and competing products with similar functionality that are available at a lower price point. The principles of supply and demand, along with substitution are in play. The principles of substitution states when a several similar or commensurate commodities, good or services are available, the one with the lowest price will attract the greatest demand and wide distribution which is why many US companies move their manufacturing overseas, lower labor cost. Apple‘s products are not immune to these principles.
Apple has sold approximately 210 million iphones since its inception four years ago. The growth rate of Apple’s iphone is astonishing with 270,000 iphone sold in the first year and five years later, if reported sales data is accurate is approaching 100 million units for 2012. Iphone sale will slow next quarter and there after maintain a steady sale rate very much like a rocket which has reach an orbit until other forces slows it momentum and its orbit begins to decay.
The Analysts belief that Apple is going to expand it sales by 20% a year for the next 5 years at current pricing is a deception. To accomplish this, Apple sales will have to increase to 153 billion in 2012 and by 2016 have annual sales of 318 billion. This equates to approximately 250 million iphone sold or 685000 iphone sold daily in 2017. Iphone sales are the anchor of Apples earnings. What if the iphone isn’t the flavor of the day in 5 years? Could this possibly happen? It has already begun in the United States as Apple will not retain all of its former users as the Iphone and Ipad interface with peripheral devices is lacking.
The fact is Apple is manufacturing at least 340,000 iphone and 125,000 Ipad each day. That is if their last quarterly report is accurate. That means the world in one year will have an additional 124 million Iphones and a poultry 45 million Ipad which will have to be purchased. In five year if projected growth rate of 20% annually are accurate there will be nearly 1 billion Iphones and 450 million Ipads sold. Apple product will be commonplace and just other commodity with significantly lower pricing which will dramatically affect apples profitability.
The majority of Apples sales will not come from the United States as its market has already been saturated and now the Apple fade being diminishing. You can see evident of this in its declining stock price.
The belief that foreign markets has the ability to absorb the millions of iphones, Ipads and other products being manufactured is not accurate at least at current pricing which is unaffordable to the masses.
I know a lot of you Apple lovers have a belief that the first item purchased by Chinese or Indians when money earn is a phone. This is preposterous I would think it would be food and clothing. But hey I but I can imagine all the naked malnutrition Chinese walking around texting and talking on their new iphones and Ipads. I am now having a mental picture of Indians wearing nothing more than their Head Wraps.
Just as any life cycle there is a beginning a growth an prime and a decline. Considering the competing products and other factors Apple is likely reaching a plateau considering its staggering amount of income it is currently earning.
I want to reiterate Apple profitability is beginning to stagnate due to the principles of substitution and supply and demand. It’s definitely not Rocket Science to understand these principles. So if you have capital invested in Apple I would advise seeking alternative investments as Apple stock price is defiantly overvalued at current pricing.