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Apple (NASDAQ: AAPL) is running low on street cred and rocket fuel. Does the consumer electronics giant have another run left in the tank?
Sure, Apple is still the largest company in the world by market cap. But the former hypergrowth darling has hit a brick wall, leaving investors frustrated. Apple shares are stuck at prices it first reached in November 2014. If you bought the stock at the wrong moment in 2012, you might have as little as a 10% gain to show for your patience. In both cases, Apple has trailed far behind the S&P 500 market barometer.
At the same time, both the iPhone and iPad lines seem to have peaked, with sales for both tracking lower year over year. This is, of course, the chief cause for those disappointing stock returns. iPhones account for more than half of Apple's quarterly revenue, after all -- slower sales in that crucial department hurts both the company and its investors.
What the pros think
You'll find investing legends on both sides of the Apple conundrum right now. According to regulatory filings, Warren Buffett's Berkshire Hathawayrecently upped its Apple holdings by a massive 55%. But George Soros exited his entire Apple stake in the second quarter, David Einhorn's Greenlight Capital reduced its Apple bet by 16%, and Michael Burry's Scion Asset Management mirrored Soros' move.
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None of these investing titans have explained their moves in public, but Buffett is betting that Apple can bounce back while the others appear to have soured on the company's risk-reward ratio.
What this Fool thinks
It's rarely wise to bet against Warren Buffett, but I think the Oracle of Omaha is playing the wrong side here.
Apple has been dead money for two years, and is in dire need of an inspiring product launch. The next iPhone model is apparently arriving in late September, and could indeed give Apple the kick-start it wants.
But last year's iPhone 6S and 6S Plus models failed to light a growth fire under the company, despite introducing some interesting new features. Early rumors and leaks for the upcoming iPhone 7 haven't shown anything more exciting than a new stereo speaker setup and the lack of a 3.5 mm headphone jack. I just don't see how this model could get Apple back to serious sales growth.
Image source: Apple.
Likewise, iPads have not introduced a whole lot of innovation in recent years. Apple fans are even growing restless about the aging Macbook Pro line of laptops, which was last updated in 2012.
Yes, Apple has a lot of cash and the pile is still growing. The company can afford to sit on its hands for quite a while, resting on its laurels until the next world-beater product comes along.
Meanwhile, investors must guess what's really going on inside the infamously tight-lipped company. Is there an Apple-branded TV set under development? Has Cupertino designed its own car, or at least a self-driving tool package for traditional car makers to use? Will the company make a big bet on the Internet of Things?
... or none of the above?
The Foolish bottom line
Look, I don't think that Apple would be a good short at this point. The cash pile alone is enough to keep the company alive and relevant for many years to come, and the stock is unlikely to dive off a steep cliff.
But it's equally unlikely to move up to any significant degree, unless CEO Tim Cook has some real magic up his sleeve. The world's largest and richest company really should be able to pull a nice rabbit out of the hat once in a while, and it could happen at any time. Still, it would surprise me. The company doesn't seem interested in doing anything radically new, and you don't win big without taking the occasional risk.
So I'll stay on the sidelines, next to George Soros and David Einhorn. Apple's mojo is probably not coming back anytime soon.
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Anders Bylund has no position in any stocks mentioned. The Motley Fool owns shares of and recommends Apple. The Motley Fool has the following options: long January 2018 $90 calls on Apple and short January 2018 $95 calls on Apple. Try any of our Foolish newsletter services free for 30 days.