Apple is a fantastic stock to own in the long term. Here are a few reasons why:
1) Their following is fanatical and obsessed with owning only Apple products. These individuals would need a substantial reason to defect to competitor product. For instance, when they compare the S3 to the iPhone and see the differences are insignificant, they will stick with Apple.
2) Their international markets have tremendous growth potential (ie China). This alone could drive huge future growth.
3) They are perceived to be the highest quality technology product. Consumers who want the "best" are by default attracted to Apple.
4) They have 137 billion in cash. Fund managers love the prospects of this money.
5) Apple has an ecosystem that locks-in customers. If someone owns an Apple TV, it makes sense to buy the iPhone over an Android phone since the iPhone integrates nicely with the other Apple product.
6) Novel products allow for the creation of entirely new markets. These lead to massive increases in profits. Novel products could include the infamous iTV.
What could be potential problems? Here's a few:
1) A competitor producing a product that substantially surpasses Apple in features/quality. I'm not sure what major feature has been left out of phones/tablets/computers so it seems like industry will be fairly static on this front.
2) A competitor could beat Apple in introducing a new novel product and capture the majority of the market for years. What product may that be? Google glasses?
As far as the short term goes, I didn't see anything particularly awful in the earnings release. The low profit number can easily be explained by the lack of iMac availability and low profit margins due to the overhaul of products (its expensive to setup all new production lines).
In conclusion, I'd take the sensationalist headlines with a grain of salt.
Disclosures: Long Apple
1) Their following is fanatical and obsessed with owning only Apple products. These individuals would need a substantial reason to defect to competitor product. For instance, when they compare the S3 to the iPhone and see the differences are insignificant, they will stick with Apple.
2) Their international markets have tremendous growth potential (ie China). This alone could drive huge future growth.
3) They are perceived to be the highest quality technology product. Consumers who want the "best" are by default attracted to Apple.
4) They have 137 billion in cash. Fund managers love the prospects of this money.
5) Apple has an ecosystem that locks-in customers. If someone owns an Apple TV, it makes sense to buy the iPhone over an Android phone since the iPhone integrates nicely with the other Apple product.
6) Novel products allow for the creation of entirely new markets. These lead to massive increases in profits. Novel products could include the infamous iTV.
What could be potential problems? Here's a few:
1) A competitor producing a product that substantially surpasses Apple in features/quality. I'm not sure what major feature has been left out of phones/tablets/computers so it seems like industry will be fairly static on this front.
2) A competitor could beat Apple in introducing a new novel product and capture the majority of the market for years. What product may that be? Google glasses?
As far as the short term goes, I didn't see anything particularly awful in the earnings release. The low profit number can easily be explained by the lack of iMac availability and low profit margins due to the overhaul of products (its expensive to setup all new production lines).
In conclusion, I'd take the sensationalist headlines with a grain of salt.
Disclosures: Long Apple
