Apple Inc. (NASDAQ:AAPL) has been growing big during the last decade, especially since the birth of the iPod and then again with the introduction of the iPhone and iPad. The company is one of the biggest in the world and has a fundamental quality: It has captured a rather large portion of users of its products as fans. This is due to constant innovation in its devices and the highest standards of manufacturing in the industry. But this huge asset can disappear quickly if it doesn’t deliver as expected in a market full of hungry competitors. In the meantime, iPhones are selling big and a breakthrough deal has come to increase Apple’s earnings as they have now set foot in China through China Mobile.
The Samsung Menace
Samsung Electronics Co. Ltd. (LON:BC94) is Apple’s main competitor with the biggest cellphone market share in the world. It has focused on diversity of devices for each economic segment and thanks to this, it has managed to flood the world with its products and to compete in the high-end market with Apple’s iPhones and iPads. I would recommend keeping Samsung shares in a portfolio as I don’t see this giant losing its market share. Samsung has also great penetration in emerging markets. Moreover it not only operates in the cellphone and other devices market but also manufactures intelligent TVs and appliances with competitive prices. I would expect their products to sell more as the world economy recovers and new technologies are adopted.
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- AAPL 15-Year Financial Data
- The intrinsic value of AAPL
- Peter Lynch Chart of AAPL
Amazon and Microsoft
On the one hand, Amazon attacks on the tablet front with its Kindle model which is cheap and allows users to get more in to its growing product diversity business. Amazon is certainly breaking records in terms of revenue but I think it’s a little bit dangerous to get into the stock at current prices of $400 with a P/E ratio of more than 150! This doesn’t mean it can’t continue growing though. On the other hand Microsoft will be assuming ownership and full control of Nokia's Devices & Services division. This should put Microsoft up in the mobile business and is sure to be competing for a slice of market share with the other titans. I’d keep an eye on this one.
I think Apple will surely be profitable in the near future and it will continue to deliver good positive results in terms of revenue growth. As we have seen, its products still have great appeal and haven’t lost quality. In addition to this, apps are selling very well and they have certainly established themselves as a very respectable source of income for the company.
Innovation has always been the key for this company. As long as they keep going forward, they’ll always have a chance to keep surprising customers and become (maybe) an even more aggressive cash machine. This is the real challenge the company faces and yet it remains a mystery whether the company will be able to achieve it without Steve Job’s master mind. One good sign about future developments is that the company has increased its spending in R&D from 2.2% to 2.6% of sales. We’ll see!