It's time for
Apple (Nasdaq: AAPL) to put up or shut
up.
Apple reports earnings after market close tonight, and
the gadget guru has everything to prove. This stock has
been on fire in 2009, doubling in price since New Year's Eve
and challenging all-time highs again after recovering from
last year's market meltdown. With a $167 billion market cap,
Apple has surpassed giant businesses like
Johnson & Johnson (NYSE: JNJ) and
IBM (NYSE: IBM) to become the seventh most
valuable stock in the United States.
But Apple's business is facing challenges it has never
seen before.
Amazon.com (Nasdaq: AMZN) offers
a reasonable alternativeto the market-defining iTunes
music store.
Microsoft (Nasdaq: MSFT) has launched a
plausible replacementfor the ubiquitous iPod called the
Zune HD, and the music hardware coming out of competitors
like
Samsung looks tasty too. Plus, the rule of
the iPod is passing; Apple is moving on to a new high-growth
market: smartphones.
Plenty of cell phones double as media players these days.
The iPhone is still going strong there, but
Google (Nasdaq: GOOG) is
getting its Android army into gear, and Microsoft has
updated its own smartphone platform, too. The
Palm (Nasdaq: PALM) Pre assault
may be stalled, but
iPhone challengers are now plentiful-- and there's
strength in numbers.
Add it all up, and we may be looking at Apple's zenith
today. The just-completed fourth quarter saw the same
challenges in weaker incarnations. The iPhone 3GS should
present record-breaking sales and profits this time around,
and a strong back-to-school season probably did the same for
the Macintosh division. But come next quarter, we'll see the
Android scaling up to challenge the iPhone for real. Will
teens and hipsters everywhere keep asking for an iPod for
Christmas -- or might their roving eyes turn to new toys?
Apple itself must be aware of these threats, and will
probably set its next-quarter guidance on a beatably modest
level. Apple has beaten every earnings target since the first
quarter of 2003, and it won't break that
streak any time soon. But low-key guidance often
drowns out even raucously strong results. The recent
run-up in Apple's stock may have set investor expectations
impossibly high. This could be your last chance to take some
profits off the table -- and buy back again when the market
has reset its expectations. Apple is by no means dead in the
water, but it may be a while until we see a P/E ratio in the
30s again.
Think I'm wrong? My flame-retardant suit just came back
from the cleaner, so feel free to fire away in the comments
below. Nodding in agreement is fine too, of course.
This article was originally published as
How High Can Apple Fly?on
Fool.com
Copyright © 2009 The Motley Fool, LLC. All rights
reserved.
|