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At PandoDaily, tech writer Farhad Manjoo has a hot stock tip for everyone: Load up the boat on Apple, it’s “a long term goldmine.”It’s a relatively non-controversial statement. The stock trades round $600, and two analysts have price targets of $1,000 on the stock.
However, in a world in which billion dollar tech companies are built in two years, and fads come and go, there is no such thing as a guaranteed “long term goldmine.”
In fact, you could easily argue that Apple is going to be a losing bet for the next five years.
We honestly have no clue which way the stock moves, but it’s easy to see why the stock’s incredible run could end in the next few years.
Read on to see why that hot stock tip might not be so hot after all …
Everyone seems to be over looking this one, and it's a little startling.
Everything -- and we mean everything -- that mattered to the company flowed through Steve Jobs. One source familiar with the company said it caused bottlenecks at Apple, and the place would slow down waiting for his approval. The next three years without Jobs are extremely uncertain.
If Apple goes from $600 to $800 in the next five years, it would be a pretty great investment.
But, to be a goldmine, we think it needs to double to $1,000, which is what more and more analysts are predicting. How does it get to $1,000? It has to generate $250 billion in revenue, which is double where it's at right now, and $62 billion in profits. Is it possible? Well, no company has earned $62 billion in a year, so it would be unprecedented. (For more on this, click here.)
We believe Android is on very uneven footing this year.
However, we don't think it's going to die any time soon. And even if Google ultimately botches Android, a company like Amazon could use the base of Android to build an operating system to rival Apple's iOS.
Who is getting all the design accolades this year: Microsoft or Apple?
Amazingly, it's Microsoft, which is suddenly showing a little mojo. As a matter of fact, Farhad Manjoo declared 2012 to be The Year Of Microsoft, and he said it would take a place along side Apple as a big mobile innovator. If Microsoft comes on strong in mobile, you can bet it's going to be a drag on Apple's stock.
Apple decided to issue a dividend. It's also reportedly on the M&A prowl for social companies.
Historically, Apple has shied away from acquisitions. What if it suddenly charts a new path and decides to buy a handful of companies and those companies just don't fit? What if ends up like Google buying company after company after company with no real rhyme or reason?
This is the latest terror-meme for Apple's stock.
The story goes that Apple is making gobs and gobs of cash selling iPhones while carriers are not doing so well. Eventually they'll get sick of subsidizing the iPhone to the tune of $400+ per handset. Once that happens Apple's margins, or sales, will take a big hit. It's unlikely, but it's not outside the realm of possibility. Don't forget, Apple's most important product -- the iPhone -- can only succeed if carriers let it succeed. That's a big risk.
A lot of people expect Apple to just waltz into the TV business and totally flip it on its head like it did with phones and tablets.
What if everyone is wrong? What if Apple's incredible run is about to end? How many companies have rolled out one hit product after another? At some point it has to end.
Also, the TV market just isn't that big. It's not like mobile phones, where you buy a new one every two years. So, even if Apple TV is off-the-charts awesome, it's not guaranteed to be a big seller. Apple sold 1.4 million Apple TVs in Q4. That's really good. But, it's a blip for Apple, and it's still a hobby.
Apple is the number one cool-kid product. But, what if there's a backlash?
The reason Apple got its cool was because it was an under dog. It's quickly morphing into the biggest baddest dude on the block. How will consumers treat the company when it's no longer an under dog?
On a broader level, picking individual stocks is generally a suckers game.
Yes, Apple looks like it's set up to be a long term gold mine, but if that was the case everyone would have already bought it. The chance that Farhad knows something the market doesn't know is very slim.
For more, check out this post from Henry Blodget: FINALLY SOME GOOD INVESTMENT ADVICE: Don't Play The Loser's Game
Following up on that last slide, let's not forget the reason we're talking about this right now.
Manjoo was inspired to write his story because Apple's stock suddenly hit a rut in the middle of April. No one seems to have an answer for what happened. The stock is just stuck. Presumably it will get out of its rut, but what if it doesn't? Look at Microsoft. It's stock has essentially been flat for 10 years even though it has built a handful of successful businesses and continued to growth Windows. At some point, it's just not good enough for investors.
When will that happen for Apple? We don't know. And neither does any one else.
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