Apple’s Magic Touch Falters

Last fall, Apple Inc. was on top of the world when its shares reached an all-time high of $705. That made it the most valuable publicly traded company, ranked ahead of Exxon.  Now, with the stock selling for around $460 and AAPL back in second place, it’s getting harder and harder to find someone with a kind word for the Cupertino giant. The news media in particular have turned on Apple with a vengeance, perhaps because they’re embarrassed at having been five months late diagnosing the firm’s declining fortunes. But anyone with half a brain – which perforce excludes mainstream newsmongers – could have seen it coming as early as September, when a whole slew of new Apple products hit the market, including iPhone5 and some iPad models that took display quality to a new level. Trouble was, there were no new products in the pipeline till spring — and even then, no assurances that Apple’s next big thing, without the guiding hand of Steve Jobs, would be new and different, let alone revolutionary.

So now Samsung is breathing down Apple’s neck, borne aloft by the kind of press that advertising can’t buy. A CNN story out yesterday bore the headline, How Samsung Is Out-Innovating Apple. Recall that it was just a few months ago that Apple won a lawsuit against Samsung involving some trivial design issues. We commented at the time that it was bad karma for a supposedly world-beating company to pick a fight with a competitor over such small things. Karma aside, Apple’s aggressive patent attornies didn’t discourage Samsung from taking the offensive with a few products that were very un-Apple-like. The so-called “phablet,” for instance. Essentially a phone combined with the much larger screen of a tablet, it was a product that many critics initially dissed. Phablets have been flying off the shelves, however, creating a huge new winner for Samsung with a device whose appeal had gone entirely unrecognized by the competition.

Software Lead Narrowing

Phone operating software is another area where Apple has been losing ground. Although Apple iOS dominated until recently, Samsung has been rapidly closing the gap with frequent updates to the Android-based operating system.  As Samsung’s director of product planning, Shoneel Kolhatkar, noted in an interview with CNN, instead of making users wait a year for new features, Samsung is using constant feedback from subscribers to deliver “incremental innovation that keeps the product alive.”  The upshot, noted CNN’s Steve Kovach, is that “Apple feels behind. Take a look at its newest fourth-generation iPad. It has a killer processor and other great hardware features, but the operating system doesn’t take advantage of any of that. The home screen is still just a grid of static icons that launch apps.”

From a technical standpoint, we have predicted a further fall for Apple shares. The target price is below $400, and we’d be keen on buying stock down there ourselves, since they’d represent pretty good value compared to the prices that prevailed last autumn. If you want to know our exact “Hidden Pivot” correction target for the stock, click here for a free tial subscription to Rick’s Picks, You’ll also gain access to a 24/7 chat room that draws veteran traders from around the world, and to all of our current forecasts and archives.

Comments on this entry are closed.

Comment Author:  casey-mudville February 19, 2013, 2:49 pm

Samsung is world’s largest consumer of chips. Their stock listed in London is up 40% in six months. They make good money profits with their smart phones and cell phones…to my surprise. I never buy Apple devices, I just don’t like their style and slant towards liberal, hip, urban buyers. I can easily take care of my own Windows 7 computers. I have an older android and will be getting better one sometime. Android vastly outsells iPhone in countries that are not so rich, such as Uruguay and Thailand.

Are the panelists on Fast Money still showing off their iPads? Must be a paid Apple plug to show how with it they are.

Comment Author:  gary leibowitz February 20, 2013, 12:21 am

Those liberal, hip, urban buyers certainly don’t care about AAPL’s dismal work practice.

I mentions many many months ago about a guy named Reggie Middleton. He has exposed the numbers over a year ago. This guy is good.

Comment Author:  Chris T. February 19, 2013, 11:02 pm

Rick:

as much as Gary North is not so popular around here, I think he got it exactly right with his Jobs / Apple comment from 10/2011.

I do recommend a read, here is the link:
http://www.garynorth.com/public/8593.cfm

Comment Author:  Rick Ackerman February 20, 2013, 2:08 am

Links to Gary’s work will always be welcome here. Although he and I have not always been on the most cordial terms, that hasn’t diminished my great respect for him professionally. He is a remarkably skillful writer and polemicist, and his essays, including the one you’ve shared above, are invariably insightful, knowledgeable and engaging.

Concerning our dispute over ‘Inflation vs Deflation’, in a private exchange I had with him, Gary’s point of view seems to have evolved so that we are not so far apart as some of the essays he has published at Lew Rockwell might give one to infer.

Comment Author:  Rick February 20, 2013, 2:06 am

Posts from Gary will always be welcome here. He and I have not always been on the most cordial terms, but that hasn’t diminished my respect for him professionally. He is a remarkably skilled writer and polemicist, and his essays are always insightful, knowledgeable and hugely readable.

Comment Author:  John Jay February 20, 2013, 7:54 am

Speaking of “Inflation”

I went shopping for some laundry bleach the other day.
My choices were a 3 quart bottle of store brand for $1.64
Or a 2.56 quart bottle of Clorox for $2.29
I don’t buy bleach very often, but I think the last time I did the price was about $1.09, and that was about one year ago. And I am not certain but didn’t a bottle of bleach used to contain 1 gallon as in 4 quarts?
Man, they sure can cram a lot of those little bottles on a store shelf now!
I went with 3 quarts for $1.64 and cut my losses.

And gasoline is up to $4.45 a gallon for premium Union 76. So it is up $.66 a gallon since 12-28-12 or 17.5% in 7 weeks. If I see any price decreases I will report them too.

And farewell to Marty Zweig, who has passed on at the age of 70. I always liked Marty, his funds were paying 10% back in the day because he said that was the least he could do for people giving him their money to invest.
And he always made good sense on the old Wall Street Week show when he was a guest. Those were the days before your account could be disappeared on a whim, and the days when guys like Marty actually did some real analysis and actually made money for clients.
So we take another step forward into the Dark Ages unfortunately as we run out of old timers on Wall Street.
So long Marty!

Comment Author:  Bam_Man February 20, 2013, 6:17 pm

Yes, Marty Zweig belonged to an exclusive group of money managers that were both successful AND understood the meaning of the words “fiduciary duty”. You’d be hard pressed to find any these days.

Comment Author:  Mac February 20, 2013, 3:33 pm

Yes, Marty was one of my favorites on WSW.

The crooks still rule, but not many Marty’s to pick us up.

(and as soon as the crooks go long gold, well, then we can make money, too)

Comment Author:  gary leibowitz February 20, 2013, 10:38 pm

Rick, good call on Gold. Not sure if it is finding the bottom yet. FED announced they will not continue buying assets even if the hiring doesn’t get back to numbers they feel comfortable with. If true, so much for an endless money printing process. Gold took another big hit after the news came out. That would suggest it’s rise was tied to economic expansion, ala Fed intervention.

Today might be the start of a month long equities correction. We also have complacency regarding the debt ceiling which has to be resolved (or pushed back) soon.

While everyone here is convinced there will be no real modification to government spending, I believe we will see real progress very soon. The Republican stance on no new taxes will stick this time around. Everyone on this board will most likely cheer the spending cuts that will hit shortly. If it does occur, the street will not go along with that cheer for long.



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