For years, Apple Inc. (NASDAQ:AAPL) was the perfect company for a large-enough-to-be-diversified, but small-enough-to-be-manageable stock portfolio. But the tech giant’s once high-flying shares have recently started sinking. If all your holdings had to fit on a 20-company punch card, would Apple Inc. (NASDAQ:AAPL) still deserve one of those precious spots?
Growing, but how fast?
For over a decade, Apple Inc. (NASDAQ:AAPL) saw fantastic growth rates, regularly exceeding 30%. iTunes, iPod, the iPhone and iPad all wowed consumers and won perpetual Apple Inc. (NASDAQ:AAPL) customers. On top of that, Apple Inc. (NASDAQ:AAPL) developed a loyal computer following, making the company all-encompassing in households that used a Mac.
Today, growth has bottomed out in the recent quarter, at just under 1%. If this is a harbinger of things to come, then Apple Inc. (NASDAQ:AAPL) is in trouble. However, this “no” growth rate represents the apparent end of a product cycle, since it has released no substantially new products for several quarters.
Apple recently hinted in its recent quarterly conference call that it is about to begin a new product cycle. This could be just in time, because if blog and media grumblings are any sign, there is pent-up demand for a set of updated products.
Expected to be coming first are new iPhones, including a less expensive version for emerging nations where the population is just beginning to move to data enabled phones. Indeed, over the next two to three years, estimates from the International Telecommunication Union indicate that about a billion new smartphone users will come to the market, raising the number to approximately 3 billion.
Apple currently has about 17% of global market share for smartphones, a distant but significant second to Google’s Android phones. If it approaches that percentage for emerging nations, Apple would dramatically increase its number of customers. Given the stickiness of Apple customers, an increase of potentially tens of millions new users is significant even for a company so large.
Apple’s stickiness stems largely from the multiple products it offers, in particular music, books and cloud storage, as well as, the inter-connectivity of its devices. For example, according to a recent Raymond James report, the iPhone’s retention rate is nearly 90%.
The report also demonstrates that iPhone does relatively better in more affluent markets, which bodes well if the global middle class indeed continues to grow. If Apple does launch a less expensive phone, it could lead to long-term customers who spend more over time as their financial circumstances improve.