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Billionaire investor Peter Thiel recently declared in a New York Times interview that "the age of Apple is over" and, in doing so, caught millions of investors by surprise.
Present company excluded.
You and I have been talking about Apple's decline for months now, and those of you who are also Money Map Report members will recall that, in July, we moved the company to a "Hold" for exactly the same reason.
Now let's talk about what's next.
Underwhelming No Matter Which Way You Cut It
I keep a paperweight front and center in my office, bearing the inscription…
Illegitimi non carborundum est.
It's a mock Latin aphorism loosely meaning "don't let the bastards get you."
Which is how I think about Apple Inc. (Nasdaq: AAPL) at the moment.
Millions of investors are considerably more giddy as evident by the 7% pop shares enjoyed Wednesday.
Team Cook posted $3.36/share versus an expected $3.21 per share, beating the collective earnings expectations of all 34 analysts following it by 4.7%.
You'd think Santa Claus showed up based on the way shares took off.
That's understandable consider the company chalked up all-time record quarterly revenue of $78.4 billion and the $3.36 per share in quarterly earning I just mentioned is also an all-time best.
Never mind a few pesky details like – oh I don't know – iPhone sales bouncing back after three consecutive quarterly declines, iPad sales dropping 22% because of inventory issues, and the company's other products falling 8% year over year.
The 7% post-earnings bounce added $47.2 billion in market capitalization while giving millions of investors a serious case of FOMO which, of course, stands for "fear of missing out."
Honestly, I'll take the bounce because it's great for anybody holding on to Apple shares.
But is this enough good news to make Apple a "Buy" again?
Like many people, I was excited to see CEO Tim Cook pivot towards the ecosphere after Steve Jobs' untimely death because it suggested to me that he understood the bigger digital integration ahead and the opportunity that went with it. And I was willing to give him some time to turn the ship, so to speak.
Now he's had that and I am totally underwhelmed.
The company's numbers are not nearly as diversified as I would have expected at this stage of the game.
Apple Used to Ooze Innovation. Now It Oozes MBAs.
The latest iPhone is barely better than its predecessor, which means the upgrade curve is slowing down both literally and figuratively. The technology lags badly behind where comparable Droid devices were years ago.
The Apple Watch… a flop.
Apple cars… no sign of them.
Apple Pay… just a ripple in the hotly contested retail shopping experience.
I'm not just worried about the end of Apple's era like Thiel is. I'm concerned that we're living through the end of Apple's ecosphere.
And we have Alexa to thank for that.
The amazingly intelligent digital personal assistant developed by Amazon.com Inc.'s (Nasdaq: AMZN) Lab126 should have been an Apple product. It's what Siri was supposed to be.
Dedicated Apple fans will no doubt take issue with what I have to say and I respect that, especially if you're one of them. But to another point Thiel has made repeatedly, and again in the same January New York Times interview, Silicon Valley has done a terrible job of fulfilling old dreams for bigger things. "Cellphones," he said, "distract us from the fact that subways are 100 years old."
Admittedly, Apple has been one of the single most innovative and spectacular companies ever created. Revenue has jumped 10x and earnings 30x over just the past 10 years. It's made savvy investors (including a good number of our subscribers who have followed along as suggested) billions.
But it's a leap of faith to think that can continue.
To my way of thinking, the real era that's ended is the one that guarantees double-digit growth based on every new iPhone release. The next jump will be all about digital integration.
Barring any sort of Jobs-style drama and a radical change in form factor, the real risk to Apple is that it becomes another company in a long line of "me-too" players.
ITunes, iCloud, Photos… these are all increasingly cumbersome to use. Worse, they force the user to adopt the thought processes of Apple's developers rather than latch on to each device intuitively – which is, of course, what made the iPhone and iPad so great in the first place when you think about it.
Several members of my team who are diehard Apple users tell me they are now going out of their way to find workarounds so they don't have to get sucked in. That's a stark change from a few years back when they couldn't wait to use the latest Apple gizmo.
The situation reminds me very much of Sony Corp. (NYSE: SNE), which damn near killed itself because it wouldn't let go of proprietary standards that made everything from the Walkman to its VCRs a real pain in the keister.
Seems to me that every time Apple makes a change, its products are becoming more challenging to use.
The bottom line?
Apple's still a hold in my book.
The company will probably have a good run this year on the looming iPhone 8 introduction when it comes out, which is why I say hang on if you're already on board. But beyond that, there's just not a lot that's going to move the needle.
For that you've got to turn to companies acting a whole lot more Apple-like than Apple itself, including Alphabet Inc. (Nasdaq: GOOGL), Microsoft Corp. (Nasdaq: MSFT) and Facebook Inc. (Nasdaq: FB). All three are actively pressing ahead instead of worrying about where they've been.
Ironically, I think Steve Jobs would agree.
He famously told his audience in 1997 that "if we want to move forward and see Apple healthy and prospering again, we have to let go of a few things here. We have to let go of this notion that for Apple to win, Microsoft has to lose."
I think those same comments apply very well today.
CEO Tim Cook is distracted by politics, and his executives strike me as being distracted by infighting.
Further, the company is waging war over security issues and seems keen to engage in litigation at the drop of a pen. If Apple were truly innovating, executives would be falling all over themselves in a race to stay ahead of Samsung, for example, which is where they'd otherwise be.
These things never end well for shareholders.
At any price.
Until next time,
About the Author
Keith Fitz-Gerald has been the Chief Investment Strategist for the Money Morning team since 2007. He's a seasoned market analyst with decades of experience, and a highly accurate track record. Keith regularly travels the world in search of investment opportunities others don't yet see or understand. In addition to heading The Money Map Report, Keith runs High Velocity Profits, which aims to get in, target gains, and get out clean. In his weekly Total Wealth, Keith has broken down his 30-plus years of success into three parts: Trends, Risk Assessment, and Tactics – meaning the exact techniques for making money. Sign up is free at totalwealthresearch.com.