As the largest company and the most-valuable brand, Apple (NASDAQ:AAPL) commands a lot of attention from both analysts and the media. More recently, however, there have been a host of negative attention surrounding Apple. Some reports are so outrageous one must assume they were done merely for attention, some appear to overestimate the risks, and others are entirely valid, although the fears have not materialized at this point.
As for the latter, perhaps the most tangible risk to Apple as an investment is if the company cannot continue to grow sales of its signature product -- the iPhone -- at a reasonable clip. And that's because Apple is the iPhone. see the chart below for a comparison of Apple's iPhone versus the rest of the company:
Over the last four months, Apple's been a bifurcated company with the iPhone registering three quarters of year-over-year 50% growth and a "slowing" quarter of 36%. The rest of the company, however, hasn't fared so well. In two of the last four quarters the company has reported year-over-year revenue drops.
With Apple's iPhone now commanding nearly two-thirds of its total revenue haul, the risk of a significant slowdown in iPhone sales is a valid one. And that's why a report from Credit Suisse has investors on edge.
Apple's leaky supply chain hints and disappointing unit sales
For Apple, a notoriously secretive company, its supply chain has become a somewhat, albeit imperfect, reliable indicator as to future products and technologies. And according to Credit Suisse, by way of Business Insider, the company is telling its host of hardware component manufacturers it needs fewer units than initially thought.
For an actual figure, the report mentions a 10% cut in components, leading the company to deduce a decrease in units built to less than 80 million units in the fourth calendar quarter. Next year, the company cut its estimates for units sold from 242 million to 222 million, a 6% year-over-year unit growth rate.
And considering the phones are the same cost as their predecessors, unlike last year's price increase that benefited Apple's comps over the past four quarters, it seems Apple's revenue growth rate in its iPhone line -- and overall -- should slow considerably going forward.
If so, and this is a big if, this could mean that Apple's biggest risk is on the horizon.
If Apple Samsung circa 2014?
A somewhat cautionary tale for Apple is Samsung (NASDAQOTH:SSNLF) in 2014. Coming off of the wildly successful launch of the Galaxy S4, Samsung was expecting the same level of success for its follow-up Galaxy S5 unit. Unfortunately, the unit was widely considered a flop as many new users migrated to Apple's iPhone. Although Samsung's flagging sales seemed to be due to a competing product, the end result would be similar.
Even Samsung's current-gen Galaxy S6 has failed to catch on in a meaningful way. Recently, Samsung reported its first year-over-year quarterly operational profit increase in nearly two years, not on the strength of its smartphone business, but in its semiconductor business. As stated earlier, Apple's currently a one-product company, so an iPhone slowdown would hurt the company more than a Galaxy S6 slowdown hurt Samsung.
It should be noted there are a few tailwinds that could possibly make Credit Suisse's analysis invalid. There's been a transition to leasing options that could shorten the upgrade cycle, a new rumor that Apple is looking to release a 4-inch mid-cycle unit to add to sales, and that China could continue to outperform as the country has been difficult to model.
More broadly, though, I'm interested in how Tim Cook handles this situation, as slowing demand for the iPhone will be the biggest challenge he's faced as Apple's CEO.
Jamal Carnette owns shares of Apple. The Motley Fool owns shares of and recommends Apple. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.