Over the last 6 months, shares of Apple Inc. (NASDAQ:AAPL) have crashed, and investing in the company has become a topic for heated discussions. The legendary Buffett says, “Be fearful when others are greedy and greedy when others are fearful,” but its shares have failed to find a bottom and many have lost trying to find one.
Growth from ultrabooks
Apple Inc. (NASDAQ:AAPL) has been known for its innovation and the premium build quality of its products. But its shares have been hammered down due to both industry-wide issues and Apple’s internal policies. Firstly, PC sales have been slowing down, which has not only hurt Intel Corporation (NASDAQ:INTC) but also Apple’s Macintosh division. To counter the slowdown and gain market share, Apple Inc. (NASDAQ:AAPL) recently slashed its MacBook prices by up to $200 and updated their processors, thus boosting the value for money factor.
According to a recent report, ultrabook shipments are expected to grow by nearly 65% for the next 4 years. That sounds doable since the upcoming Intel Corporation (NASDAQ:INTC) Haswell has a low TDP of 7W with 18%-20% faster graphical performance as compared to the Intel Ivy Bridge. Additionally, Haswell chips consume 20 times lower idle power consumption, which further boost the practicality of ultrabooks while still retaining the slim factor. As a matter of fact, analysts at Lazard have upgraded Intel due to the ultrabook and smartphone growth, despite the slowdown in PC sales. Going by the analyst consensus, Intel’s annual EPS could grow by 11.75% for the next 5 years.
That is a huge avenue for growth and Apple Inc. (NASDAQ:AAPL) would definitely benefit here. Its upcoming MacBook Air and MacBook Pro (all) models are expected to sport retina displays which should extend its lead over Windows based counterparts.
Growth from tablets
One of the main culprits for declining PC shipments has been the recent spurt of tablet launches, which are expected to grow by 48.7% (sales) year-over-year in FY13. To gain a greater market share in the highly competitive tablet industry, Apple Inc. (NASDAQ:AAPL) has reduced its refreshment cycle to 6 months, which makes iPad 5 and iPad Mini 2 due for launch. This leaves consumers dissatisfied with the timing of their purchase, but allows the company to roll out competitive products more frequently.
Its closest rival, Samsung leads the smart devices industry with a 21.2% market share and with the launch of iPad Mini and iPhone 5 last year, Apple closed in on its peer with a 20.8% market share. The street is expecting a retina display in iPad Mini2 and a faster processor (probably A7) for the iPad5. If Apple delivers what the street is expecting (without skyrocketing prices), Apple could have a good chance to surpass Samsung in overall smart devices market share.
This is because iPad Mini has become a sensation because of its practicality and form factor. Although Apple sold an impressive 5 million units of iPad Mini(s) in January alone, I believe the best is yet to come. The mini tablet comes equipped with an A5 processor compared to an A6X processor in iPad 4 leaving a gaping hole in its hardware. It is due to this reason that many consumers (including me) had abstained from purchasing it and are awaiting for the new launch.
But as far as smartphones are concerned, analysts expect Samsung’s Galaxy S4 could more than double its lead over Apple. Its definitely not a easy task, but also not an impossible one, especially since Apple has been producing premium quality products, while Samsung’s smartphones have a plasticky feel to them.
According to speculative reports, Apple is developing cheaper iPhones that are expected to be launched in June. Going by the Apple’s device roll out history, the launch of iPad Mini 2 should lower the prices of the existing iPad Mini, which could initiate a fresh spurt of buying. Although Apple hasn’t been able to bring innovative products lately, it shouldn’t be written off, just yet. Its discounted products make it evident that the company is inclined to towards volumetric growth and not margin driven growth.
So Apple it is?
As of now, it’s hard to predict a bottom. A lot of sentiment has been attached to Apple, which throws investment mechanics out of the window. Until Apple delivers what is being expected (or maybe more), its decline could continue. Its renewed strategy seems like pushing retina displays to all its products, while making them cheaper to renew growth. The iWatch is also coming, but investors should keep a close eye on Apple’s upcoming products and enter Apple only on confirming a shift in its core strategy.
The article What to Expect of Apple? originally appeared on Fool.com and is written by Piyush Arora.
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