Apple’s results in the December quarter disappointed many analysts. But now based on the news reports suggesting that first-quarter sales have not gone well and Apple’s failure to release any new products so far this year, many on Wall Street believe that Apple will miss even its low guidance for the quarter.
Many expect that Apple will provide an outlook for the June quarter that is far below what Wall Street is currently expecting.
The silver lining is that, for the first time expectations for Apple’s quarter are very low. And, if Apple sets the bar for the rest of the year low enough, which will give Apple the opportunity to do something that it has not done in more than a year–surprise Wall Street on the upside. The other good news for Apple’s shareholders is that, in the high $300s, the stock appears to be cheap.
Apple’s profit margin will almost certainly drop over the next two years, as the company faces strong competition from Samsung, Google, and other hardware manufacturers. But even if Apple profitability drops, the company should still generate enough cash to make the stock’s valuation look attractive.
To be sure, if Apple is in the early phase of a long-term decline, then today’s stock price is not, in fact, “cheap.” The stocks of companies like BlackBerry, Dell, and Hewlett-Packard looked very cheap in the early stages of their collapse…but then the companies’ businesses collapsed, too. If Apple’s product quality deteriorates, or the company clings too stubbornly to its current price points, Apple will be at risk of staging another complete collapse, following in the footsteps of the near-death experience it had in the 1990s.
However at present Apple is still an excellent company with excellent products that has just missed a couple of steps.