The financial media was abuzz with news that Apple (AAPL 0.01%) sold nine million of its new iPhones within the first few days of its launch. Pundits were quick to celebrate Apple's return to glory, seeming all too willing to forget that just a few days ago those same financial experts were resoundingly negative about the company and its future.
Have Apple's fortunes really turned around so quickly? Or, could the pervasive fear and negativity simply been a matter of media sensationalism?
Looks like Apple can still innovate
Frankly, it never made sense to me that investors were so bearish on Apple. It's understandable that investors would be worried about margins, as it's been abundantly clear that Apple's costs would rise and product mix would weigh on margins. Beyond that, though, the tone throughout the financial media regarding Apple had gone beyond simple caution. It seemed as though nearly every analyst and pundit actually expected Apple's imminent demise.
Predictions of Apple's collapse were built on a foundation of speculation and anecdotes, not on real financial analysis. Quite simply, Apple is one of the most successful businesses on the planet. For all the cries of the company's supposed downfall, nobody wanted to acknowledge the fact that revenue is up 11% through the first nine months of the year. And, Apple expects to generate $37 billion in revenue in the fourth quarter, which would again represent year-over-year growth.
So, what we've got here is a company that stands to produce higher revenue this year than last, all the while paying a 2.6% dividend and buying back $60 billion of its own stock, with $147 in cash and marketable investments on its books. Yes, earnings per share will likely suffer slightly, due to the previously mentioned margin compression. But does this really sound like a collapsing business to you?
Meet the real collapsing smartphone makers
If investors really want to find the struggling mobile device makers, look no further than BlackBerry (BBRY +0.26%) and Nokia (NOK 0.89%).
BlackBerry's situation is so dire that it may be taken private for $9 per share, after warning investors it stands to lose nearly $1 billion this quarter. Such a massive loss is bad enough, but it looks even worse when you consider that BlackBerry just released a new phone and operating system. The fact that the company is hemorrhaging so much money despite rolling out new products is a terrible sign.
As far as Nokia is concerned, the situation isn't much better. Nokia was once a leader in mobile device market share, but is now a shell of its former self. Nokia booked an operating profit of 8 billion euros in 2007. Last year, the company recorded an operating loss of 2.3 billion euros. Like BlackBerry, Nokia was recently offered a lifeline in the form of a $7.2 billion offer from Microsoft (MSFT 0.60%) for its smartphone business.
I'm not entirely sure Nokia investors should be too comforted by joining forces with Microsoft. The software giant has its own share of issues—mainly, being unable to implant its products and services in devices that actually sell, despite throwing billions of dollars of shareholder money at the problem. Nokia's Lumia devices have run Microsoft products and services since 2011, and haven't produced anything good so far. Microsoft's Surface tablet has also been a disaster, forcing the company to take a $900 million charge against earnings in its latest quarter because it sold so poorly.
Apple proves a point
Apple will probably always have its detractors. However, even those who dislike Apple personally need to put aside their emotions when analyzing stocks. Any investor willing to be objective can plainly see that Apple's iPhone and iPad simply dominate the consumer technology landscape.
The stock market is at an all-time high and interest rates remain near historic lows. In this climate, a 2.6% yielding stock trading for 12 times earnings has to be attractive to an investor looking for value, growth, or income.
