Apple has been a tech favourite for the better part of a decade now, but with so much of its success now pinned to the iPhone, the stock is looking shakier than it has for a long while, says Lorne Steinberg, president of Lorne Steinberg Wealth Management.
This week, Apple announced it will be rolling out new versions of its iconic iPhone, this one a red version of the iPhone 8 which first hit stores last fall. The company is achieving a modicum of success through offering a range of smartphone models at different price points, resulting in the company’s passing Samsung in Q4 of 2017 sales, capturing roughly 20 per cent of the smartphone market worldwide.
But it’ll likely take more than a colour change and a few price options for it to stay in the lead, which is a worrying prospect, says Steinberg, who argues that too much of the company’s growth relies upon its mobile phone business, meaning that when the next tech quantum leap takes place — and if it’s not coming from Apple’s R&D — they’re in trouble.
“[Apple’s] become a one-product company from a shareholder perspective and that just means there’s a risk level there,” says Steinberg, in conversation with BNN. “And so, if it’s a huge [investment] position, I would absolutely be trimming it back.”
Steinberg points out that 70 per cent of Apple’s revenues last quarter came from the iPhone and that sales were actually down one per cent. iPad sales increased by one per cent over the quarter and some of its subscription services were up, while Mac unit sales declined a full five per cent.
In February, the International Data Corporation (IDC) reported that vendors moved 403.5 million smartphone units over Q4/17, a 6.3 per cent decline compared to Q4/16. Sales for the year were also down slightly, with well-developed markets in China and the United States posting lower numbers.
“It’s like everything else in technology: it all becomes commoditized,” says Steinberg. “People are actually changing their phones less often than they used to, until we get the next new big thing. Will Apple come out with the next product or are there two people, you know, sitting in their garage in Silicon Valley (or Mississauga) who are working on the next thing which will displace these other things?”
Apple is said to be developing a touchless gesture control for the iPhone, which will allow users to complete some tasks by moving a finger near the screen but without having to tap it. The company is also working on a screen that curves inward from top to bottom, unlike Samsung phones which at the moment have curved edges, allowing the phone to be narrower but with the same surface area as a flat screen.
“It’s an amazing company, with a huge cash position and everything that we like, but if it were a large [investment] position then we would be trimming it back because the iPhone is the company,” says Steinberg.
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