As a long time technology expert, I am blown away by the negative speculation that has been hovering over Apple this week. The stock rose too far and too fast for people not to be nervous and take a breath and some profit off the table. Let's break it down and refute 3 commonly heard fears.
- Verizon sees a decrease of 1 million iPhone sales last quarter. A true piece of data to be sure, and I will grant you we may see a decline of the same level at AT&T this week. However, given that Sprint will see a full new quarter selling the device along with five smaller regional carriers throughout the United States, isn't it safe to assume that, at most, we will see a US sales decline of less then 500,000? Couple that with the fact that China and Brazil came on line at the start of 2012 to great expectation and fan fare. China alone could have sold 2 million iPhones in the quarter. Even if Europe is down, the new carriers should more then make up for the decline. We should not underestimate the supply chain brilliance of Tim Cook to have made sure that enough phones were shipped into the channel to stoke demand.
- This is my favorite fear of the week. Verizon, AT&T and Sprint will stop giving large subsidies to offset the high cost of the iPhone. Ha! This presupposes that people that walk into an AT&T store or Verizon store are going in with an open mind, and can be swayed by the store's sales staff. This will never happen, because if one of the carriers does this, it would limit their overall growth and would send people to the other carriers, who are still providing the subsidy. I have three teenage boys, and they no longer use their computers - all they use is an iPhone for all of their browsing needs. The computer is for spreadsheets and word processing only. The carriers understand this, and all talk about Nokia and the Windows 8 phone being pushed by the carriers is just talk. It will never happen. People pick the phone they want based on their experiences and trends, and the trend is not saying, "Hey, look at my cool new Windows phone!"
- Apple has become overvalued. This is ridiculous, and we would not even have the conversation if Apple was a $57 stock instead of a $572 stock. The market has always paid for future growth, and there is no other story in the market that can rival Apple's. Not Chipotle (CMG), Not Priceline (PCLN), or AutoZone (AZO). The have new products that are appearing in every quarter. They are moving heavily into selling into the school systems. Look at the desk of any commentator and what do you see? Windows 8 tablets? No, we see iPads. The spirit of Steve Jobs did not leave Apple with his death. Tim Cook was the perfect balance between "adult supervision" and allowing the creative people freedom to continue to build some of the greatest tools of the last century. Apple should no longer be valued as a technology company. It is a class in itself.
I look forward to the report on Tuesday, and I believe that the market will reward investors for their patience during this turbulent time in the market. Fear is scary, especially so when you see the highs and lows this stock has had. Understand, though, the growth that Apple has ahead of it, and appreciate that your investment in the company can not be matched by any equity or bond in existence today.
Disclosure: I have had long and short positions in both AAPL and RIMM this year.