Over the years we have periodically looked at Apple (AAPL). The question we have repeatedly raised is how long the company can continue to grow when it already has one of the highest or the highest market capitalization. The question has been when should you sell Apple stock? This morning AAPL fell $8 a share on the first ever quarterly drop in iPhone sales. The Apple iPhone earnings miss leads the news in USA Today as the markets also worry about Fed decisions on the interest rates and worries about the tech sector in general.
Stocks are off to a weak start Wednesday ahead of the Federal Reserve’s key decision on interest rates later today and following a big earnings miss from iPhone maker Apple that is weighing heavily on tech-stock packed Nasdaq composite.
The storyline for the tech sector has turned negative in recent days amid a number of disappointing earnings reports from key players in the sector, ranging from Apple’s (AAPL) first ever quarterly drop in iPhone sales reported after last night’s close to high-profile misses late last week from Microsoft (MSFT) and Google parent Alphabet (GOOGL).
Stock market history is full of growth-plateau-demise stories. When the USA was putting telephones in every home in the early 20th century it was hard to go wrong with AT&T. When every family was getting a car, or two, after World War II it was hard to go wrong with the likes of General Motors. And when home computers and their operating systems were brand new it was hard to go wrong with Microsoft. But late in the game AT&T broke up and is a shadow of its former self. GM went bankrupt although it is back. And Microsoft has become a dividend paying blue chip instead of the growth engine of the 1990’s. How about Apple?
Inventor of the Home Computer and More
The Apple computer was the miracle of the late 1970s. Who would have ever though that one might have their one own home computer. But the stock never took off in the 1980’s and 90’s like Microsoft did. This is probably because the company did not open source its software to outside programmers like IBM did with the PC. Thus Apple was near bankruptcy in 1997 when Bill Gates of Microsoft appeared with Steve Jobs who was back at Apple and announced that Apple was rescued by Microsoft with a $150 million investment. Wired tells the story.
1997: Microsoft rescues one-time and future nemesis Apple with a $150 million investment that breathes new life into a struggling Silicon Alley icon.
With Jobs back at the helm Apple invented hand held devices like the iPhone and IPad and grew hundred fold by 2014. But the question has always been when would the market be saturated with iPhones, iPads and competing devices for the likes of Samsung? It just might be that we have reached that point. So, should you sell Apple stock? Microsoft took a hit after the dot com collapse but stayed in the $30 range paying dividends after it quit growing. Now with a broader focus the company sells for around $55 a share and pays a reliable dividend. If you were in Apple only for the growth it may be time to sell. On the other hand if you want a well-run company that essentially has a license to print money with its attractive products you may wish to hold on to a few shares!