It seems that nothing has been going right for Apple's (NASDAQ:AAPL) shareholders. While the bull market rages on, Apple's shares remain down 26% year-to-date. This is despite a massive buyback program in place (although I'm not convinced that Apple's unleashing the buyback kraken as aggressively as it could), a much fatter dividend than ever, and ahead of a major product refresh cycle. The question is, ever since the shares topped back in that fateful September, nothing has really been able to give the stock back its mojo. The question that now lingers on the minds of investors everywhere is, "can Apple's stock be saved?"
Long Term: Probably Dead Money From Here
The problem with a "buy and hold" strategy for Apple is that probability is weighed substantially against you; that is, when you're dealing with the second largest company in the world by market capitalization, and when that market capitalization is driven by the whims and tastes of fickle consumers, it just seems that the majority of the risk is to the downside. The opportunity cost here is enormous and the things that need to happen for Apple to at any point in the near future double are simply downright unlikely.
In terms of upside, what do you really have? A smartphone, tablet, and PC vendor that is competing in an increasingly competitive environment in which every high end vendor is trying (and in some cases managing) to outdo Apple. Look at the breakneck pace at which the smartphone vendors have introduced larger, ultra-high resolution phones in the Android space using Qualcomm's (NASDAQ:QCOM) latest-and-greatest processors? How long did the Android phones have LTE before Apple finally got around to implementing it? And where the heck is the iPhablet?
The worst part is that even if Apple were to reinvigorate its competitive positioning in this highly cutthroat, specs and bells and whistles driven market, it would still be competing with device vendors such as Samsung that have extremely favorable cost structures (it's nice to make your own DRAM, displays, NAND flash, etc.) or like HTC which isn't averse to selling a quality device at much thinner margins than its competitors. This is ultimately a significant risk to gross margins and the bottom line, and I believe that even if revenue growth can remain non-negative over the next several years that net income is going on a long trip south.
This Isn't Another Nokia/BlackBerry, Though...
As bearish as I am about Apple given this very tough operating environment, I do not believe that Apple is the next Nokia (NYSE:NOK). Nokia had/has some brilliant engineers, but the company spent too much time and money pursuing things that just don't work or weren't really customer-centric. You've got to hand it to Apple; each dollar of R&D that Apple puts in generates substantially juicier returns than Nokia's did at the height of its popularity because Apple knows how to make products that sell, even if it's going to face a significant amount of strong competition in order to sell it.
The same goes for BlackBerry (NASDAQ:BBRY); a bunch of great engineers that were unfortunately told to work on the wrong things at the wrong times. While the firm is making quite a bold (no pun intended) comeback with its new BlackBerry 10 platform, BlackBerry faces fundamentally the same Android problem that Apple does, except Apple's products are much more successful and have earned a substantial amount of brand equity with consumers.
I don't think Apple ends up like either of these fallen angels; the massive amount of cash and the wonderful balance of an engineering and marketing driven culture within the company is likely to keep the firm's products relevant and highly profitable for many years to come. The problem here isn't one of profitability, but instead one of growth, and it just seems that Apple's finally seeing the effects of competitive pressures in what is quickly degenerating into a commodity market.
The Bottom Line
The key takeaway here is that this is a stock for traders at this point; there's not much here for long-term investors. The company is already massive and makes most of its money off of a market in which fierce competition is eating away at market share, margins, and ultimately revenues. I expect continued volatility in the share price as different catalysts/events hit and get people excited/depressed, but from a long term perspective, you can do much better than Apple on the market today, which is why the share price has been stuck in a rut and will continue to be until something changes dramatically. I just don't see it and I would not want to own shares for more than a swing trade at best.
Disclosure: I am long QCOM. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.