Everything has been horrible for Apple Inc. (NASDAQ:AAPL) for the past three quarters. Zilch seems to be going right, Apple has lost half its market capitalization, competition seems to be increasing, and innovation seems to have been stopped. The rest of the market has been performing better than ever; however, Apple has fallen over 20% year-to-date. So, there is only one ultimate question here: Why did Apple fall so much, and will it continue to fall? Below I will discuss why Apple Inc. (NASDAQ:AAPL) has fallen and why it will not continue to fall.
A few months ago on a conference call with Apple’s Tim Cook, Apple Inc. (NASDAQ:AAPL) announced a share buyback. The announcement of the share buyback has not triggered an upward trend yet, but it will over time. The majority of buybacks that are done raise the price of a stock. Buybacks are a sign of a company with solid fundamentals and a horde of cash.
On April 23, Apple announced a 15% increase in its dividend payout, this converts to a cash value of $3.05 per share. Unless Apple’s current cash circumstances change, the likelihood of it reducing its dividend payout is highly unlikely. A decent dividend means that the company is stable for long-term growth and is a good investment.
Fundamentally, Apple Inc. (NASDAQ:AAPL)’s valuation is amazing. Apple trades at a P/E of 10.2. Apple’s PEG ratio is at .62. Its earnings and revenues have steadily been increasing. Apple’s return on equity is 40%.
Since the death of Apple’s founder, Steve Jobs, Apple’s innovation levels are at a new low. Apple’s ingenious inventions – the iPhone, iPad, and iPod – were all successful. But lately Apple has not done anything fabulous. Apple needs another phenomenal product. This drop in innovation has taken a toll on its share price.
In the last ten years technology has advanced far beyond any of us could have imagined. Apple Inc. (NASDAQ:AAPL) has dominated various technology markets, but in the past couple of years competition has increased from a number of competitors. Some major competitors are Samsung, and Google Inc (NASDAQ:GOOG).
Price competition and product competition has especially hurt Apple in the smartphone market. Apple continues to lack the innovation that it used to have. Apple has not come up with a new product; it simply revives its old products. In my opinion, that is not enough.
Apple used to have this flair in its products; people would wait for its conference calls to see what Apple came up with. Companies would rush to build something as good as Apple’s products. Apple released its iPad three years ago, and since that moment in time, its competitors have released their versions. Competition is to the point where now there are nearly 100 devices just like the iPad.
A major competitor that Apple has faced throughout the years has been Google. Google has threatened Apple’s existence in many ways. An example of a major threat is its phone line. Google’s Android has continued to pose a threat to Apple Inc. (NASDAQ:AAPL)’s key, the iPhone. Google Inc (NASDAQ:GOOG) has a ton of cash as well, an estimated $15 billion. If Google continues on this path it will surpass Microsoft as a stable and solid company.