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Much to the delight and relief of investors, Apple (AAPL) shares are finally regaining their luster, and are currently trading near their 52-week high just north of $100. (The stock had a 7-for-1 split in early June.) This marks a big change from a year ago, when Wall Street appeared to sour on the tech giant amid heightened competition and a short-lived bottom-line retreat. And we see the momentum persisting through fiscal 2014 (ends September 27th) and into next year, as the company benefits from a powerful upgrade cycle, including the likely launch of a next-generation smartphone, the iPhone 6, sometime this fall. Indeed, double-digit earnings advances look to be back in the cards for this behemoth, which should keep the mega-cap stock heading in the right direction. With this in mind, is now a good time for investors to initiate or add to their positions? Or do the risks outweigh the possible rewards of holding the equity long term? In this brief article, we will attempt to address these questions by taking a look at Apple’s business and performing an easy-to-follow SWOT analysis of the company, evaluating its Strengths, Weaknesses, Opportunities, and Threats.

The Business

Apple, incorporated in 1977 and headquartered in Cupertino, California, designs, manufactures, and markets personal computers, mobile communication and media devices, and portable digital music players, and sells related software, services, peripherals, networking solutions, and third-party digital content and applications. Top revenue-generating product lines include Macintosh notebook and desktop PCs, as well as the iPhone, iPad, and iPod franchises. These devices are sold predominantly through the company’s online and retail stores, and through third-party cellular network carriers around the globe. Applications and other digital content are also available via the iTunes and App Stores.

Strengths

Innovation: Apple, which rose to prominence behind the visionary leadership of Steve Jobs, has had a knack for staying ahead of the fast-moving technology curve. This was notably evident when the company launched its first iPhone (June, 2007) and iPad (April, 2010) mobile Internet devices. And while questions linger about whether CEO Tim Cook possesses the magic touch of his legendary predecessor, we believe that innovative new products will remain a hallmark of Apple. Next up should be the iPhone 6 (an October release date is rumored), which is expected to come in different display sizes to better enable the company to compete with Samsung’s popular smartphone offerings. An iWatch is probable sometime this year, as well, likely followed by an iPad Air 2, an iPad Mini 3, an iPad Pro, new Macbooks, and an updated mobile operating system. These new products ought to create a powerful tailwind, and should contribute to a nice acceleration in earnings growth in the coming quarters.

Rock-Solid Finances: The company has been nothing short of a cash cow since the first iPhone was launched. In fact, it has amassed quite a war chest, including about $38 billion in cash assets and $127 billion in long-term marketable securities on its balance sheet (as of June 28th). This is supporting strategic acquisitions, like the recent $3 billion deal for Beats Electronics, as well as an ambitious capital return program. Apple, under pressure (from billionaire activist investor Carl Icahn, among others) to be a bit more shareholder friendly, has been paying a cash dividend since early 2012, and just upped the quarterly payout by 8%, to $0.47 a share. (The yield is now around 1.9%, pretty close to the Value Line median.) What’s more, the company has been an aggressive buyer of its own stock. To this end, the board of directors, back in April, raised the repurchase authorization from $60 billion to $90 billion. This buyback effort should help to bolster share net as we head toward late decade.

Weaknesses

Premium Pricing: Apple’s computing devices are typically among the pricier ones on the market, even though the company did attempt to expand into the large value segment when it launched its scaled-down iPhone 5C smartphone in September of 2013. (That product, unlike the higher-end 5S model, has not been met with great commercial success.) This luxury positioning has made it difficult for Apple to make big inroads overseas, in countries where the pressures on ordinary consumers are considerable. It also renders the company vulnerable to price competition, not just from South Korea’s Samsung but from up-and-coming OEMs, like China’s Xiaomi, which has grown at a blistering pace over the past few years.

The iPad: The tablet PC franchise, a huge initial success and still the second-largest product line behind the iPhone, has been something of a disappointment lately relative to Apple’s own high standards. In fact, iPad shipments fell 9% during the June interim, to 13.3 million units, with particular weakness in the U.S. and Europe. (The product line is faring considerably better in the emerging BRIC nations.) We attribute the slowdown to softness in the broader tablet space and to stiff competition from Google’s (GOOG) Android-powered devices that often retail at much lower price points. The recent sluggishness may well persist, too, unless the company can begin to make strides in the vast enterprise market. It’s now endeavoring to do just that, as evidenced by a new partnership with IBM (IBM Free IBM Stock Report). Together, the two tech titans, long at odds with each other, will work to develop business-focused apps for both the iPad and iPhone.

Opportunities

Market-Share Growth: Despite a historic growth spurt over the past several years, Apple still has plenty of room to extend its share of the traditional computing space. It currently has an almost-20% piece of the global PC/tablet pie (ahead of such rivals as Lenovo and Samsung), but we see this number increasing in the years ahead, especially as the company gains ground in China and the rest of the Asia/Pacific region. iPhone penetration should also rise in the important BRIC geographies, as Apple inks more deals with influential local wireless carriers. The company called its recent, long-awaited distribution agreement with China Mobile a “watershed” moment (China Mobile has a huge network of roughly 760 million subscribers), and it should pave the way for similar OEM tie-ups down the road.

Beats Electronics: This giant deal (the largest in Apple’s storied history), completed in early August, left some Wall Street analysts scratching their heads. The company looks to have paid a hefty price tag, it seems, given that a 2013 investment by the asset management firm Carlyle Group had valued Beats’ assets, including its high-end headphone line and streaming music services, at around $1 billion. The acquisition makes strategic sense upon closer examination, however. The up-and-coming music properties will likely prove to be a nice complement to Apple’s free iTunes radio service, which has generally garnered mixed user reviews and is going up against popular streaming offerings from Pandora (P) and Spotify. And Beats’ electronics unit should prove helpful when it comes to developing the iWatch and other smart, wearable devices. Notably, Beats, founded by respected music industry veterans Jimmy Iovine and Dr. Dre, has a highly creative management team, so the talent infusion will probably go a long way toward allowing Apple to maintain its status as the sector’s leading innovator.

Threats

Competition: This is the main threat to most tech outfits, considering the relentless product cycles, the typically rapid move toward commoditization in the sector, and the fickle nature of today’s consumers. And Apple, as we’ve already suggested, is especially susceptible to price discounting by low-cost rivals from China and elsewhere. Cannibalization is a concern here, as well, with the company continuing to expand its platform of mobile Internet devices. Indeed, this may be one of the things hurting iPad sales lately.

Gross Margin Pressures: These could stem from stepped-up competition (and the resulting loss of pricing power), product shortages (which often wreak havoc in the tech sector), or rising component prices. An unfavorable mix shift away from the dominant iPhone line could also squeeze profits. This may explain why the company is working to broaden its suite of high-margined software and service-oriented offerings.

Conclusion

In sum, though there are sure to be challenges ahead, we think that Apple’s positives easily outweigh its negatives at present. The stock remains something of a bargain in this frothy market, too, notwithstanding its recent rally. Indeed, trading at about 16 and 14 times the consensus share-net estimates for fiscal 2014 and fiscal 2015, respectively, the good-quality issue still looks to have room to run. Dividend growth will likely be healthy, as well, with the company now looking to return more of its cash hoard to shareholders. And Apple’s excellent finances make its shares suitable for most accounts. 

At the time of this article’s writing, the author did not have positions in any of the companies mentioned.