I called the Apple peak a few months early in market terms, but the call was spot on when you look at these charts. It just took a couple of quarters for investors to realize how empty this growth engine’s fuel tank really was. My bearish CAPScall on Apple has been cheerfully green for a while, even though I missed the actual top. That’s OK; Fools generally don’t worry about perfect market timing.
And now it’s time to remove that bearish CAPScall. At this point, Apple looks set to trade sideways for years to come, and that thesis isn’t worth a virtual “short” investment. So I’m taking this chip off the table to lock in my positive CAPS score from Apple.
This is where Microsoft steps right back in the discussion again. You see, Redmond’s shares have been stuck in neutral for so long, the only way to have made any long-term gains on the stock would be to reinvest the dividend (or just pocketing the quarterly payouts).
If you bought Microsoft shares at the start of 2003 (just before Redmond’s first ex-dividend date), you’d have gained $5.48 in share price increases over the last decade. Meanwhile, dividend checks added up to $5.23.
Microsoft suffered a creative crisis over the last decade, where every new product seemed to be just a refined version of something Redmond already had on store shelves. Customers caught on and slowly stopped paying a premium for the Microsoft brand. And the stock transformed from a red-hot growth vehicle into a safe, predictable value and income play.
MSFT Revenue TTM data by YCharts.
That’s the kind of future Apple investors should expect at this point. Cupertino has been playing the refining game for years already, focusing on different sizes of the same iOS-based slate concept.
Consumers will keep buying them for years to come, mostly because it’s what they’re already used to. Kind of like buying Microsoft Windows PCs because it’s familiar, not because it’s better than MacOS or other alternatives. But the market for this particular type of mobile gadget, with this particular user experience, is getting mighty saturated.
The proof is in the financial pudding above, not to mention Apple’s stagnant unit sales. In the third quarter, Apple sold 45.8 million iPhones and iPads combined, just 6.5% above the year-ago quarter’s 43 million.
So it’s time to accept that Apple is becoming the Microsoft of the next 10 years. The company is far too big and rich to die entirely, but margins will shrink and P/E ratios will compress. This is a value and income stock now, and hardly the growth play of years past.
The article Are You Ready for the New Apple Stock? originally appeared on Fool.com and is written by Anders Bylund.
Fool contributor Anders Bylund has no position in any stocks mentioned. The Motley Fool recommends Apple. The Motley Fool owns shares of Apple and Microsoft.
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