Apple’s Stock Price: Are You Worried About A Fall?

No flames, please. Comments, yes. I’m worried. Apple’s stock price, largely based on the runaway success of the iPod and iTunes Music Store, is now firmly entrenched above $40 a share.

It wasn’t but a couple of years ago that Apple stock was selling at a bargain rate in the low teens. Still, the company managed to make money, roll out new products, and maintain market share.

Now, the iPod’s a hit, Macs are NOT selling like hotcakes, a little profit is still there, products are dribbling out, and market share is in the tank. Should Mac users and Apple stock owners be worried?

I’m concerned. I can’t be the only one.

One good reason for concern is when all the stock market analysts are saying the stock price will go higher. That bothers me. Usually, they’re the last ones on the boat after everyone else has figured out the value of a stock.

There’s lies, damned lies, and statistics. Let’s look at a few statistics beyond the high stock price.

Apple sold over 2-million iPods in the recent quarter. One report says that’s about 80-percent to 90-percent of the hard drive portable music player market. What’s that say? It’ll go higher? That’s unlikely. However, even a dribbling down of market share could devastate the stock.

Apple made over $100-million in profit for the quarter. That’s good, right; considering all the iPod hoopla? But they’ve made similar profits in recent years without the iPod or new G5s.

Apple has sold over 150-million songs on the iTunes Music Store. That’s good, right? Recent reports say that amount is 60-percent to 80-percent of the legal online music downloads. That’s great news, but can we expect that percentage to stay there? Again, a drop could be devastating to prestige and stock price.

Apple’s portables continue to be a big hit despite not having much muscle in the chips. More laptops were sold in the recent quarter than PowerMacs, eMacs, iMacs. The reason given is the continued low supply of G5 chips from IBM. How long will that drought continue?

What happens when Apple has more G5 chips than they have customers? There’s that old market share whammy again. While I don’t expect Apple’s market share to climb to double digits anytime soon, most analysts are saying to expect a “halo effect” with iPod sales and retail stores.

That is supposed to translate into more Mac sales. You remember the Mac, don’t you? That computer thingy that sits on your desktop and connects you to the Internet? Sales were up very modestly in the last quarter; again, supposedly because of constrained chips and late iMac G5 shipments.

To be fair, Apple appears to be doing some wonderful things while making money at the same time (the old fashioned way). Microsoft makes money hand over fist (they don’t earn it; illgotten gains being what they are) but isn’t doing anything wonderful except perhaps self-destruction.

Apple’s cranking out the software, pushing into music, exploring new territory with online music downloads, and making all of it work together is such a way that no one cares that there is competition. And there is competition, right?

You’d never know it from the iPod’s recent numbers, but that’s only a part of Apple’s story and I’m concerned that it’s covering up another part of the story that’s not so pretty.

The next two quarters will be very telling for the Cupertino darling. Not only must the iPod momentum continue, iMac and PowerMac sales MUST pickup and grow beyond industry growth rates. They must. Because the analysts are expecting this “halo effect” and so am I.

Is the company set for a crash? That wasn’t my premise. Apple has about $5-billion in the bank, no debt, and products (not all of them) that Microsoft would kill to own (and who says they won’t?).

That stock price worries me. Does it worry you? A little bad news could trip up this rolling locomotive (to mix a few poor metaphors) very quickly.

Still, later this year, when Apple introduces a 60-gigabyte video capable iPod, I’ll buy one. I may pay for it with some recently sold stock, though.

What do you think? Is the train about to stop? Can Apple keep up the momentum? Are their better times ahead or worse times?

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