Apple Needs More Momentum To Keep Its Market Share

Sep.27.11 | About: Apple Inc. (AAPL)

Apple’s (NASDAQ:AAPL) stock is on everyone’s radar these days, and for good reasons: Its economic fundamentals seem better than ever, as the company enjoys a sustainable competitive advantage in two of the hottest areas of mobile devices -- mobile phones and tablets. The company further displays a strong operations statement, an outstanding balance sheet, and a near perfect chart. But how much better can things get? How long will it take before competition closes in or the market becomes saturated?

Operating Margin


Quarterly Revenue Growth


Quarterly earnings growth




Total Cash


Operating cash flow


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That’s where my worry is. So far, Apple’s barriers to competitors and innovation magic have been formidable, and any company -- from Nokia (NYSE:NOK) to Research in Motion (RIMM) to Hewlett-Packard (NYSE:HPQ) -- that has tried to challenge Apple have been trashed.

In recent months, however, Apple has faced a serious challenge to two of its blockbuster products, the iPad and the iPhone. On the tablet market, Apple contends with an unlikely challenger: online seller (NASDAQ:AMZN). On Wednesday the company is expected to announce the release of its new version of the Kindle reader, which some analysts expect to be a serious challenge to Apple’s iPad. On the iPhone side, Apple faces a new challenge from Google’s (NASDAQ:GOOG) Android phones, especially if Google manages to integrate Motorola Mobility (NYSE:MMI) successfully to its organization. In fact, according to a Nielsen survey, Android phones command a 43 percent market share, compared to 28 percent for iPhones.

The bottom line: Unless Apple manages to come up with another blockbuster version of its iPad and iPhone, it will become increasingly difficult for the company to keep up its growth momentum. Conservative investors should avoid the stock at this price level, while aggressive traders may want to short the stock.

Disclosure: I am long AAPL, and I may buy GOOG.