SWOT Analysis : Apple

“Despite better-than-expected quarterly earnings and an increased dividend, Apple has an uphill climb for the foreseeable future”

Peter Misek – Jeffries Analyst (On CNBC – 23rd April 2013)

 Investment world always try to price present moment (read stock price/company) based on future expectation and in that process totally decouples with past achievements. So what if Apple has given us fantastic products and even if its revenue for first half of current FY stands at over $98B and net income at $22B, the share price has gone down by almost 22%. I hope they continue to innovate and continue to launch breakthrough products.

Strength:Innovation: Company’s business strategy leverages its unique ability to design and innovate. It spends close to $3.3B on just R&D.

 

Strong Cash Position: Company enjoy huge cash on its B/S. Overall cash stands at $29B and almost zero Debt.

Stellar product lines: Nothing to much to say – Iphone, ipad,Mac. It has sold 85M Iphone and 42M ipads ( in first half of current FY).

Strong Ecosystem: Apple has app stores in 155 countries and iTunes music stores in119 countries. It helps generate tremendous revenue from all these places.

Excellent Brand: Apple has build a fantastic brand over time, customer expectations are always high from apple and believe it can give them something which is unique and truly breakthrough products.

 

 

 

 

 

Weakness:No visible Growth Catalyst: Though there are talks of iWatch ,iPen etc. but no solid prospect in near sight

4 – Inch product: The market has moved to 5 inch display but Apple is still not able to bring 5 inch display and does not look like it is going to launch soon.

Absence of Steve Jobs: A passionate guy who enjoys innovating new technology. If apple wants to continue enjoy its past success it needs one more Steve.

Sign of maturity: In latest earnings call, CEO talked about dividend and excess cash it has. Apple is known for innovative products not a great dividend paying company. Apple’s wants to return $100B to its investor by FY15.

Falling Margin: In latest earning result (2013 Q2) , overall profit margin stands at 21.9% from 24% one quarter ago.

Falling R&D Investment as % Revenue: Apple was investing about 3.1% on R&D in FY09 and now it stands at 2.2%. Revenue has gone up but to sustain that growth it has to spend good sum on R&D.

Premium Pricing: Apple is able to command premium pricing because if its product feature , however competitors are catching up fast with much more features and at lower cost

Open OS: Android has emerged as common platform for most of the mobile manufacturer. A user can switch mobile manufacturer easily and he knows he is switching to a new mobile device not OS.

 

Opportunity: 

Smart phone opportunity: In latest research note from Nomura, Analyst expect 13%,16%,14% growth for smart phones in FY13,FY14 and in FY15 and APAC market is driving significant growth in that.

Innovation: Apple has ability to create new revenue stream through new product line. So if they get it right again then that would bring fantastic growth to Apple.

 

 

Threat:High Competition: Samsung continue to growth its revenue exponentially. It is available now in 110 countries and Samsung has plan to release it in 155 countries.

Asia Market: US market is almost saturated , most of the growth would come from Asian market . Samsung and Lennova are more visible and established player in Asia

 

 

For Apple Fiscal year ends in the month of September.

 

Source:

Finance Google , CNBC , 10 K report , variety of analyst reports.

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