Is this thing on? OK, thanks.
Hi. My name is Anders and I'm an Apple (Nasdaq: AAPL) skeptic. I made that clear two years ago, and the stock has more than doubled since then. So far, I've been very, very wrong.
Being an Apple skeptic is not a terribly popular position today. Cupertino just posted a monster quarter, breaking records left and right. iPhones are beating the entire Android ecosystem, iPads outsell market-leading Hewlett-Packard's (NYSE: HPQ) PC systems, the company is richer than King Midas and Croesus put together, and CEO Tim Cook can probably blow gold bars out his nose at will. All under the watchful spirit of patron saint Steve Jobs, of course.
I get it. What's not to love?
We're talking about an already huge company that's growing larger and larger, faster and faster. Its sleekly elegant consumer devices are not only beautiful but also easy to use, and surely deserve the price premiums that make them so darn profitable. And ever since Jobs presented iTunes with sensational TV ads to the tunes of U2 and Feist, you can look up "cool" in any dictionary and find a full-color Apple logo as the definition.
But empires fall all the time. What makes this one any different?
Examples, please
The transcontinental dominions of Genghis Khan and Alexander the Great fell apart. Once one of the largest retailers in the world, Montgomery Ward is now firmly out of business. Fellow mall anchor Sears (Nasdaq: SHLD) is heading down the same path. And do I need to remind you of Eastman Kodak (OTC: EKDKQ), which went bankrupt after 132 years in business and may liquidate entirely before that story is fully told? Note the consumer theme in these sorry tales (well, except for the ancient conquerors).
Many fallen kings enjoyed their greatest moments of glory very shortly before their downfall. Take Enron, for example. The energy trader was revealed as a sham in 2001, and has become a poster child for diversifying your 401(k) portfolio. Just before the scandal blew up, Enron had been named "Most Admired" by Fortune six years running. If everybody says they love your company, don't believe the hype.
This could very well be the peak of Apple's powers.
Everything that took Apple to this summit was envisioned and commissioned by Steve Jobs. There was never any guarantee that even his style genius would deliver hits unending, but it sure doesn't help that he's gone. The common consumer (Latin: Communi accumsan) is a notoriously fickle creature that may grow tired of soft, white plastic at any moment. If and when Apple stops dictating taste trends, will the company be ready to adapt to new market conditions?
The bigger they are, the harder they fall. The plunge from these lofty heights looks painful indeed. I'm not saying that Apple should die a horrible, scandal-tainted death like Enron, but it'd take divine intervention to keep those gleaming cylinders firing. And like I said, the patron saint is watching from the celestial sidelines now.
I'm not kidding around
Yeah, I'm still a skeptic today. I was just a little early to the party the last time I made this call. This time, I'm putting my professional reputation on the line.
The brand new thumbs-down CAPScall I just placed on Apple will probably hurt my All-Star standing for a while. There's a fair bit of market momentum behind this mirage. Well, tough. Market timing is a sucker's game anyway. Come back in two or three years, and I believe that the growth story will start to crumble.
Consumers will move on to the next big, shiny thing and reduce Apple to a niche player once again. Any empire built on the taste buds of retail consumers stands on feet of quicksand. The circle of life complete, Apple shares will be a whole lot cheaper. You can quote me on that.
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