2 Things Apple Does Wrong

Markets Motley Fool

There's no doubt that Apple (NASDAQ: AAPL) is one of the greatest, if not the greatest, companies of our generation. Apple generates huge amounts of cash and profits each year and is the most valuable publicly traded technology company in the world, commanding a market capitalization of $882.3 billion as of a recent check.

Continue Reading Below

However, just because Apple is a great company doesn't mean it's perfect, with no room for improvement.

Missing transitions

To be clear: I view Apple as, by and large, a mobile technology innovator. It has driven many of the big user experience paradigm shifts in the mobile industry, such as app stores, multitouch technology, the move to fingerprint authentication that works well, sharp mobile displays, 64-bit mobile processors, dual-lens cameras, high refresh rate displays, and 3D sensing cameras for facial recognition and facial tracking.

However, Apple isn't always at the forefront of certain technology/user experience shifts, which sometimes disadvantages the company in the marketplace relative to competition. 

For example, Apple was a few years late to bringing out smartphones with large screen displays -- though when it finally did, it saw a surge in smartphone shipments. Apple has also been slow to transition to displays with narrower bezels. Even this year -- with the introduction of the nearly bezel-free iPhone X at an ultra-premium price point -- the company's mainstream iPhone models (iPhone 8 and iPhone 8 Plus) still retain largely the same basic shape as the iPhone 6 and iPhone 6 Plus, respectively. 

Continue Reading Below

Considering how important form factor is to prospective smartphone buyers, that's probably something that's holding back Apple's iPhone sales, which are extremely important to Apple's overall financial performance, making up 55% of revenue in the recently reported fourth quarter.

The good news is that Apple seems to be improving here. The iPhone X, though positioned as an ultra-premium model, is thoroughly cutting-edge, and the models that Apple is reportedly preparing for next year sound even more competitive. Reports say it will introduce even larger-screen versions as well as iPhone X-like devices at more accessible price points.

Too few products

One of Apple's strengths is that it can focus its substantial research and development resources on a small number of products. Generally, that means those products get far more individual attention than, perhaps, any individual product that one of Apple's competitors will put out.

That being said, there's certainly room for Apple to expand its product portfolio -- especially its iPhone product portfolio -- to more aggressively attack different segments of the market. The company has slowly expanded its iPhone portfolio. In 2014, it added a large-screen Plus model to its lineup that ultimately helped to both cater to a wider range of premium smartphone customers and increase its average selling prices. 

Then, in 2016, Apple introduced the iPhone SE, a low-cost, small-screen smartphone that it uses to cater to cost-sensitive users (as well as users that simply want smaller devices). And, in 2017, Apple introduced the iPhone X as a premium-priced preview of the future of iPhone. 

Based on the leaks and rumors that have come out about Apple's 2018 iPhone lineup, Apple is going to bring the goodness of the iPhone X to a lower price point as well as to a larger-screen form factor (and, implicitly, a higher price point). This shows that Apple is taking steps in the right direction, but there's room for Apple to introduce something on the order of four new iPhone models per year over the long term. 

Find out why Apple is one of the 10 best stocks to buy now

Motley Fool co-founders Tom and David Gardner have spent more than a decade beating the market. (In fact, the newsletter they run, Motley Fool Stock Advisor, has tripled the market!*)

Tom and David just revealed their ten top stock picks for investors to buy right now. Apple is on the list -- but there are nine others you may be overlooking.

Click here to get access to the full list!

*Stock Advisor returns as of November 6, 2017

Ashraf Eassa has no position in any of the stocks mentioned. The Motley Fool owns shares of and recommends Apple. The Motley Fool has the following options: long January 2020 $150 calls on Apple and short January 2020 $155 calls on Apple. The Motley Fool has a disclosure policy.