You know what they say, right? “What goes up, must come down.” Apple is up and just a few dollars in stock price from becoming the first company to reach a $1-trillion valuation. That’s trillion; not billion.
Other companies are closing in on the unicorn market cap, too. As of Thursday, Microsoft sits at more than $800-billion. Google at more than $850-billion, and Amazon more than $875-billion, but Apple sits precariously close to unicorn valuation at almost $980-billion.
Wait. What? How can that kind of market cap be considered precarious? First, there’s gravity. Second, there’s the old saying, “What goes up, must come down.” Apple is up. What’s next? $2-trillion? Or, some kind of market correction for these high flying technology stocks that defy gravity?
Apple just had another blowout quarter with record financials and the market has responded well. For a change. The hunt for $1-trillion is on and Apple leads the pack.
What could go wrong?
Digging through the latest financial information I found a flaw. Not in the numbers themselves, but in Apple’s ability– now on record– to defy gravity and stay above the unicorn number of $1-trillion valuation.
What flaw? What number?
iPhone and iPad grew at 1-percent over the same period a year ago. Mac sales were down over 13-percent. Apple is a hardware company and those hard numbers belie the truth. Hardware sales are not increasing in number. iPhone seems to be selling at higher prices than ever and that impacts profits, but total unit sales are mostly flat and have been for a few years.
Apple sells hardware and hardware sales are not growing.
What about Beats, and Watch, and applications? Yes, they are growing the revenue stream, but are not all those just add-ons? Accessories or accessory-like products that depend upon Apple’s major hardware lines for profits?
What about Services? This financial segment is the darling of market analysts these days and it grew– again– at around 30-percent. Services? Yes, Apple Care, App Store apps, Apple Pay, Apple Music, iTunes media and everything else that isn’t really hard hardware gets lumped into Services and Services continues to grow like crazy and make profits faster than presidents go crazy.
Here’s the problem and this is where I worry about Apple’s coming fall from grace. Services is fully and completely dependent upon hardware. iPhone, iPad, Mac. If those fall, and we see signs of that already, then Services may grow a bit because of the installed base of customers which now exceeds a billion, but a significant drop in hardware means a plateau for Services somewhere down the pipe.
Speaking of pipes, CEO Tim Cook says he and Apple are excited about products in the pipeline. You know, like Macs with faster Intel Inside; or, maybe a new Mac mini or MacBook Air, or perhaps iPad Pro models with Face ID.
Or, Apple Glasses. Or, Apple Car? Right now I’d settle for a battery powered, foldable iScooter or iSkates. Apple is a hardware company and hardware sales are not doing too well these days.