Apple: Too Far Too Fast, Again

| About: Apple Inc. (AAPL)

I will not pull any punches here. The Apple (NASDAQ:AAPL) share price has gotten ahead of itself, in my opinion. Of course it's my opinion because every Apple cheerleader on the planet will get their rocks ready to throw at me. It does not help my stance that I was very wrong in my last article, when I had the audacity to suggest a strategy of options to protect profits and maybe even profit from a downturn. I was so wrong that it was almost laughable.

I believe the main reasons I was so wrong were that the rumors of the iPad Mini were just getting traction, and the anticipated Apple TV was heating up again. I believe I underestimated the strength of the "herd" rushing into the stock based on the rumored new products, as well as as the anticipated dividend. My bad, I jumped the gun.

Since that time the stock has kept moving higher. I believe this has been another parabolic move. The price of Apple shares stood at $620 when I wrote that article on August 9th, and a mere 14 days later the price now stands at $663/share.

Apple bulls (which I happen to be) will say it has only been a 7% increase, and stocks can rise by 7% in one day for crying out loud. This would be true, and Apple HAS risen by more than that in one day, but given some of the issues that Apple has faced in the last few weeks, any prudent investor should be saying "hey, wait a second".

First let's look at the charts: (Have I told you how much I love charts lately?)

Since July 25th the share price has rocketed roughly 16% higher.

The Nasdaq has risen only about 7%.

The S&P has risen only about 4%.

The Dow has risen just above 3%.

So what does all of this mean? To Apple bulls (including me), absolutely nothing. The issue is that we simply cannot ignore the fact that Apple's share price has doubled, tripled and even quadrupled all of the major market indices.

These facts do not mean much unto themselves, but when several other facts are added, one needs to at the very least, pause, and consider taking some profits, NOW.

Apple Issues During This New Parabolic Move

  • We all know about the "Trial", which is in the hands of the jury now.(Read this article for details)
  • China sales have slowed, and the iPhone has not made the impact that most thought it would have, as noted in this article;

"Part of Apple's trouble, according to IHS, is that the iPhone doesn't comply with the fast-growing domestic TD-SCDMA air standard. IHS also says a lack of a low-end smartphone model also hurts the company -- in China, many consumers purchase phones directly, rather than through carriers at a subsidized price, IHS says."

Ok, so that argument might be a stretch to many folks, but this certainly is not a stretch:

"The company is a pop culture icon in the U.S. and elsewhere, respected for its industrial design, user experience and marketing chops. It retains an aspirational air about its products even as it undercuts competitors. In China, it's just another vendor, albeit a coveted one."

Not that being just another vendor is a terrible thing in China. I mean the 141% increase in sales, to over 160 million smartphones, from 2011 is staggering, but guess what folks, Apple is in 7th place on the "slice of the China pie" list.

No matter how Tim Cook wants to slice it, this is not great news. As noted in this article, Samsung had nearly 21% of the market share, while Apple had only 7.5%.

"Of the smartphones that shipped to China from January through June, the majority-20.8 percent-were made by Samsung, which likewise now dominates the U.S. market and overall phone market.

Lenovo was the second-most-popular brand, with an 11 percent market share; followed by Coolpad, a domestic brand, with 10.4 percent; Huawei, with 9.8 percent; and Nokia, with a 9.1 percent share.

Sixth place went to ZTE, with its 8.4 percent share, and behind it came Apple, with a 7.5 percent slice. While it's a small-enough share to back IHS' assertion that Apple isn't doing all it can to compete, given the scale of the Chinese market, it's still enough to make China Apple's second-most-lucrative market."

For those of us who want to merely brush this off, we might want to just consider that the share price might be pricing in numbers FROM China that exceed the reality.

Apple can turn things around tomorrow, if they came out with a cheaper phone however. The question is; will they? Their history has shown that the company is very reluctant to undercut its own products by coming out with "cheaper" versions. Apple products are the best of the best right? Why compromise that for little old China!

Since the sales of the iPhone has actually just begun in the last 6 months or so, we can take a look at this chart, to note the overall decline in revenues that Apple has had since the beginning of the year.

Obviously, the launch of new iPhones and iPads in China did not help the decline in revenues (sales), even in the second quarter. With the issues I have noted above, it seems even less likely to turn those numbers around too quickly.

If they do not compete with some lower priced products, Apple just might find themselves in the unique position of playing second (or 7th) fiddle.

Could this be a good thing for the share price?

  • Last but not least, can Tim Cook keep up the Steve Jobs "mystique".

I personally think that Cook has done a great job of running the second leg of the Apple "relay". He has not dropped the baton he inherited from Jobs, and has rolled out all of the products in the pipeline that were handed off to him, in a baton like fashion.

That being said, Cook is not Steve Jobs. In this article, the differences between Jobs and Cook are duly noted:

"Cook always has gotten high marks for his operational skills. He's a tough negotiator with suppliers, keeps a lean inventory and manages cash and expenses well. But Jobs was known for his artistic taste and attention to detail when it came to products, marketing and advertising. And that's where Apple is showing worrying signs of losing its way."

Not to mention the recent advertising debacle that Apple faced during the Olympic Games;

"The "Genius" commercials ran for a brief time during the summer Olympics and were quickly pulled.

"Those Olympic ads were horrible," said ISI Group analyst Brian Marshall. "If Steve were still around, those Olympic ads probably would never have seen the light of day."

Ok, so this is not the end of the "Apple World" as we know it, but once again, take a look at the parabolic move of the stock and the other issues that the company is facing.

It might add up and it might not. At some point the stock will pause regardless of what anyone says. The point I am making here, is that NOW could be a really good time to take a few chips off the table.

The decision is yours.

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. 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.