The last year has seen Apple Inc. (NASDAQ:AAPL) shares rise nearly 75% to over $700 and subsequently fall by a third to $450. And while you can read any number of theories explaining this, you don't need to know why prices are volatile, only that they are! And, this provides opportunities to value investors!
The winners in the Internet and e-commerce space are finally becoming clear:
Google Inc (NASDAQ:GOOG) : With a dominant Internet search product (60% of worldwide market share) as its foundation, Google Inc (NASDAQ:GOOG) has built an impressive portfolio (mobile operating system and browser) to unify users' experience as they move from one device to another.
eBay Inc (NASDAQ:EBAY) : Broad commerce functionality, including mobile shopping applications and payment services, in-store PayPal point-of-sale tests, and partnership with Discover, have helped create a leadership a global commerce facilitator for years to come.
Amazon.com, Inc. (NASDAQ:AMZN) : Low-cost operations, network effect, and laser focus on customer service have made Amazon the most disruptive force in shakeout among traditional brick-and-mortar retailers.
Given the short product cycle and intense competition and thus the need to continually develop superior products, Apple Inc. (NASDAQ:AAPL) is considered as to be more vulnerable in the medium/ long term. The list of once-great consumer electronics companies is of course, long. However, Apple has staying power because it has built an ecosystem of applications and content spanning multiple devices, creating a relationship that survives any single device. Starting with iOS (operating system), Apple Inc. (NASDAQ:AAPL)'s economic moat may be widening with iCloud ( online storage and synchronization across iOS devices). Once multiple devices are in place, the switching costs are magnified, with people reluctant to replace their phone, tablet, music etc. at the same time. Here Apple maybe more like Microsoft (with Windows), than Blackberry or Motorola (with Razor)
Demonstrated in Strong Financials
Here Apple has no comparison.
|GOOG||Internet content||Large growth||15%||25 - 30%||15 - 20%|
|FB||Internet content||Large growth||28%||10%||20%|
|AMZN||Speciality retail||Large Growth||33%||< 5%||20 - 30%|
|EBAY||Speciality retail||Large Growth||15%||15 - 20%||15 - 20%|
|CSCO||Communication equipment||Large Core||10%||20 - 22%||12%|
|IBM||Computer systems||Large Core||10%||15%||30%|
|MSFT||Software Infrastructure||Large Value||10%||35 - 40%||18 - 22%|
The sharp decline in Apple Inc. (NASDAQ:AAPL)'s price have been attributed to no. of issues including – (i.) hedge funds selling to book profits, (ii.) slow down in growth, (iii.) lower gross margins, etc.