On August 21, as it share price rose to above $674 apiece, Apple established itself as the world’s most valuable company in history in terms of market capitalisation. On that day, Apple’s market-cap rose to an astounding $632.64 billion – $13 billion more than the previous best of $619 billion clocked by Microsoft in 1999.
Of course, adjusted for inflation, Apple’s shares will have to cross $880 in today’s prices to meet Microsoft’s benchmark, but then, who’s comparing apples with Apple?
Back to Apple’s meteoric rise – its share prices have more than doubled since January 1, 2011 – and the reasons behind it seem to be the rumours surrounding its twin spearheads, the iPad and the iPhone.
The latest bout of rumours suggest that the iPhone 5 (or whatever it will be called), the iPad mini and Apple’s set-top box are in the pipeline and are extremely close to their respective launch dates.
While Apple doesn’t announce the launch dates or specs or even as much as acknowledge the existence of its product pipeline, a pseudo industry of rumours surrounding Apple and its products has sprouted over the past few years, with only a handful of rumours accurately predicting the launch date and specs of Apple’s new products while others remain off the mark.
Not that Apple minds the publicity – accurate or otherwise.
Nevertheless, with Apple becoming the world’s most valuable company – ever – there are genuine concerns on whether or not it will be able to sustain its stellar growth, and if its products will indeed go down as another fad – remember how digital watches were once the rage?
Here are five reasons why we think Apple investors are set to lose huge money in the long term:
1. Buy the rumour, sell the news: That’s the age-old wisdom from the bourses, and Apple investors will do well to pay heed to it, especially now with stock prices soaring to all-time highs. Every time a rumour about an impending product launch pushes up a share price, chances are that the actual event – the launch of the product – will bring the prices down even if the news matches the forecast. The lower price comes about because the early birds take profit on the up move that they themselves engineered.
2. Look at history: Apple may be today’s most valuable company in the world, but there have been others there before it. Past holders of the title include General Motors ($66 billion in May 2000; $33.87 billion in August 2012), General Electric ($477 billion in March 2001; $220 billion in August 2012) and Microsoft ($618.9 billion in December 1999; $258.21 billion in August 2012). Exxon Mobil, the last cup holder, is down about a fifth to $403 billion in August 2012 since peaking at $513 billion in September 2007.
3. Competition will catch up: Don’t say it – don’t say Samsung… Apple is indeed a brilliant company and has become the most valuable by the sheer competence of its founders (Steve Jobs, yes, but don’t forget Wozniak with the same first name and Ronald Wayne) and workers. However, an unlikely source of Apple’s stark rise has been the sheer incompetence of its competitors, some of whom have been resting on past laurels for years. If you’re an Apple shareholder, hope that the incompetence among its competition continues. Logic and the law of averages say otherwise.
4. It’s a fad, it’s a fad, it’s a fad: Just look at Facebook’s share price for rationalisation. Smartphones and tablets are indeed the must-have digital accessories today (and perhaps will remain for a few more years) but bellbottoms were once in, and there was a time when the humble digital watch was the gadget to have. Something new (or older) will inevitably come along and if Apple can’t redefine itself with every new wave, it will end up with the likes of IBM and General Motors.
5. It’s overpriced: Or so it seems. Instead of buying the whole of Apple (if you had the means and the inclination, that is), you could instead buy 100 per cent ownership of the following: 10 penthouse units in the iconic Burj Khalifa, every share of all companies listed on the Abu Dhabi Exchange, every share of all companies listed on the Dubai Financial Market, Facebook, Boeing, Du Pont, Estée Lauder, Kellogg, Heinz, Gap, Macy’s, Campbell Soup, and Tiffany & Co. All of them. Together. And still have about $200 billion to spare.
While there are many more reasons why we believe Apple shares can only fall from their peak, we’re also sure that the Cupertino-based tech titan is, as you read this, trying every trick in the book (and outside it) to keep innovating.
At the end of the day, what will keep Apple ticking is the wow factor – the ability to beat and exceed market expectations with most new product launches. So far, the company has managed to do just that.
Will it, like countless others, become a victim of its own success or will it create history by being the only company in the world to continue innovating at an ever faster pace? What are the odds? You tell us.