Apple investors are wondering why the stock keeps dropping despite the company’s extraordinary growth rate and future prospects.Part of the weakness is obviously the result of overall market weakness.
But there are some Apple-specific concerns as well.
Here’s our sense of them:
- Investors are still in the dark about who will run Apple if Steve Jobs doesn’t return–as well as when this question will finally be answered. This is a massive uncertainty. The market deals with uncertainty by compressing a stock’s trading multiple. Apple could help address this by putting in place a clear succession plan, but it hasn’t.
- The iPhone 5 did not appear in June. Apple faithful recoil at the use of the word “delay” to describe this phenomenon, but that’s how the market sees it. Every year for the past four years, Apple has rolled out a massive new iPhone in June. This year, it didn’t.
- Google’s Android platform has blown past the iPhone in mobile OS market share and continues to extend its lead. Although there are many reasons why the mobile war may not be a repeat of the PC war in the 1990s, but there are also plenty of similarities. And Apple got so thoroughly thrashed in that war that investors are justifiably concerned about it.
- Apple is now huge–a $100 billion revenue company–and investors are intelligently assuming that its amazing growth rate won’t continue indefinitely. The larger companies get, the harder it is for them to grow at extraordinary rates. Apple’s market opportunity remains enormous, and the company is likely to continue to grow rapidly for a while. But investors are wise to assume a significant deceleration.
Of all these reasons, the Steve situation is probably the most important.
In a way, the situation Apple finds itself in is akin to an impending CEO retirement–without a successor having been named. In such “lame duck” periods, companies can become paralysed, as managers focus more on their own future and political stature and uncertainty and less on the business.
Photo: Dan Frommer, Business Insider
And, in Apple’s case, unfortunately, the situation is even worse: No one knows whether Steve will return, or when, or even when the question of his return will finally be put to rest. So the company is in a sort of perpetual purgatory.The longer the Steve question remains unresolved, the more investors will worry that Apple is in a state of semi-paralysis, in which everyone–including the company’s senior management–is waiting to see what will happen.
And that, if nothing else, will continue to weigh on the stock.
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