Apple (AAPL) is becoming “a real company” again. In the last recession from December 2007 to June 2009 everyone was blaming the economy but Apple was not. After 13 years of YoY quarterly growth Apple now expects a little more than 8% Q2 revenue decline.
Apple CFO Luca Maestri stated in an interview with Reuters,”As we move into the March quarter it’s becoming more apparent that there are some signs of economic softness. We are starting to see something that we have not seen before.”
It’s been a good run, mostly rosy, from an adjusted share price of $0.99 to $105.26, an astonishing 1074% from 2000 to the 2015 close. Apples best years were 2004, 2009, and 2007 with gains of 201%, 147%, and 133% respectively. At worst apple lost 35% in 2002 but this was before the 13 YoY quarterly growth streak. Last year was the only other yearly loss, a modest 3%.
So what happened? The mighty Apple also follows the rules of the market. Apple creates great product but not more disposable income for the consumers. In growth Apple took money consumers were spending on other products. What exactly is an iPhone? It’s a computer, camera, photo album, gps, mp3 player, calculator, planner, Rolodex, and many other things. Products that iPhone users no longer have use or need money for.
Apple just became too big going from yuppie owned product to one owned and almost needed by everyone. After years of recreating product categories like the smartphone and tablet Apple is running out of revenue growth steam. Samsung took a bit of relative market share between the big two but also taught Apple their last lesson, people wanted bigger screens.
Bigger iPhone screens prolonged revenue growth for a few more years but a wall is now here. Don’t expect Apple to be a growth company any more. Apple will likely trade around its dividend from here. At a share price of $99.99 per share the dividend rate is 2.08%. Using the WIM 3.03% average dividend (Wal-Mart, Intel, and Microsoft), Apple could trade down to around $69 per share. That being said Apple has a hoard of cash that can be used to increase the dividend if the board of directors deem that necessary.
Don’t expect Apple to go away, as the company runs out of things an iPhone and sister products can be the company will strive for new categories of product. The Apple TV and Apple Watch work and show growth. Those are just not enough to make up what can be lost from the iPhone which just became too big. Apple has power in the name, if they put their logo on a refrigerator people will buy it.