Companies Haven’t Been Under-performing Stock Market Expectations at This Rate Since The dot-com Boom

When the dot-com boom was in full effect you could just see the skepticism in investor’s eyes. The widely ignored signs of distress in the markets and a lack of quality companies led to an unprecedented rate of  failing companies and eventually a disastrous crash that led to even the almost demise of now gigantic Amazon.

It’s important to recognize what led to the boom and crash cycle that was the dot-com boom. You could hope to be able to say that it was the research and view of smart investors that knew what they were dealing with. However we all know that that’s just not true. In practice it was the total lack of knowledge of these investors that led to a huge rise and the formation of a bubble around these companies that would eventually lead to the infamous crash.

Investors had no idea what they were dealing with at the time and for the time being they had absolutely no knowing or research on the companies and their expectations for the future of these companies. With antiquated investors having no idea about what the advent of the internet or what it meant in the long term they instead focused their efforts pumping money into these companies that they believed were on the bleeding edge of technology and a changing world.

What they did not know or simply did not want to know because of the massive returns that these companies seemed to be able to provide was that many if not most all would fail. Weather to poor leadership or an inadequate plan, these companies were doomed to fail from the start.

Now with the internet in full effect and technology seeming to grow at an unheard of rate these companies that seemed to at one point to just be pipe dreams are popping up all over the place. Because of the ability of anyone to be able to create an online company and pump content into the pipes added with the seemingly never ending amount of time that we spend online sites can catch fire quickly and burn forever.

Social media and the complete online presence of most of our lives have led companies to grow quickly. With this generation being so easily moved to another product or service the same companies that were shot up, can also be shot down.

Mainly in the Tech industry now do we see these companies popping up claiming to be the next big thing? With great numbers of users and somewhat of a fan base they get popular with investors quickly. The next thing that happens is they go public. With seemingly no way to make money these companies truly believe that they can figure it out as they go. Face book did it, why can’t I? Many people ask.

Here is the problem. When you go public and have a large fan base and increasing users, as well an entire generation of people that seem to use your service, you attract investors. For a time they will let you use the money to expand and grow, but eventually they expect you to be able to perform. When month after month you fail to bring in any form of revenue, people get less exited. Investors pull out and you fail to make any kind profit and maybe even go under.

Is Apple worth Buying?

Apple will have you think that it is doing great. If you just went off of what Tim Cook would have you believe he would make you think that all is good and Apple is as strong as it ever was. He even said this in a press release outlining the earnings and some of the more “advertise-able” numbers that they currently have that and I quote “We are proud to report a strong March quarter, with revenue growth accelerating from the December quarter and continued robust demand for iPhone 7 Plus,” he also said “We’ve seen great customer response to both models of the new iPhone 7 (PRODUCT)RED Special Edition and we’re thrilled with the strong momentum of our Services business, with our highest revenue ever for a 13-week quarter. Looking ahead, we are excited to welcome attendees from around the world to our annual Worldwide Developers Conference next month in San Jose.” According to Tim Cook all is good in the world of Apple, nothing fishy at all. Apple’s CFO Luca Maestri went on to quote in the press release “We generated strong operating cash flow of $12.5 billion and returned over $10 billion to our investors in the March quarter.” Looks like a strong quarter, I guess were done here.

NOPE!!! We’re going to dig a little deeper into Apple’s numbers so that you can decide whether or not you should consider investing. First let’s go over the numbers that Apple has clearly stated in the press release. They report $52.9 billion dollars in quarterly revenue vs. the $50.6 billion in the same quarter last year. They also report the quarterly earnings per diluted share are 2.10 vs. last year’s 1.90. With an increase of $50 billion in capital return to investors and a $210 billion increase in share repurchase not to mention the 10.5% increase in the company’s dividend which brings up the dividend up to 0.63 cents per share, it seems like all is good for the tech giant. But is when you dig a little deeper into the numbers where it gets interesting.

On Apple’s website under the investment tab and the newsroom page, you can see the basic outline used to get investors exited, calmed, convinced or otherwise to ultimately get people to invest, or for people to increase their investments they already have. If you scroll down and click on the PDF that they have listed, they have an unaudited report of their basic numbers. Here’s what they said. For one Apple has a revenue of $21,157,000,000 in the Americas down from $31,968,000,000 last year in the same quarter, this represents a 33.8% loss in revenue in the Americas. With total quarterly revenue at $52,896,000,000 down from $78,351,000,000 last year, that’s a $25,455,000,000 loss from last quarter representing a 32% mark. But here are the scary numbers so buckle up. 34% quarterly loss in Americas, 31% quarterly loss in Europe, 34% quarterly loss in greater China 22%, quarterly loss in Japan and a 35% quarterly loss in rest of Asia pacific. Ok we got through that part together, now we can move on to equally maybe even more scary numbers but with more insight.

As we have known for a while Apple is a major one product company. We all know what that product is so say it with me, iiPPhhoonnee. With Apple’s dependence growing on the iPhone even more and its sharp decline in sales it does not spell good for Apple. They currently have 68% of total revenue coming from the iPhone. That’s a lot, it represents $33,249,000,000 in quarterly sales with all other products listed including iPad, Mac, services and other products only equating to $19,647,000,000. And that may be fine if the iPhone was continuality growing in revenue and units sold, but it’s not. The iPhone’s sales were down 35% this quarter and even though that can be justifiable with the aging product and anticipated release of the iPhone 8 it is to be expected that the units go down but 35% is far more than expected. You cannot rely on a single product so much if you experience fluctuations that hefty regarding that product. In China and much of Asia new, cheap and good phones are starting to pop up everywhere to compete with the much more expensive iPhone. In the Americas Samsung is becoming more of a competitor in the market with the Galaxy 8 out and many people very impressed with the results and performance as well as features that it has that Apple has arguably been lacking behind in.

Apple needs to diversify their product line and lean away from the total dependence that they have with the iPhone. They also need to innovate more to keep cheaper more accessible options out of the market share for the cell phone market. If not it could lead to a disaster, if phone sales become less and less prominent in the future with the advent on a new technology Apple could have a hard time catching up to its competitors

Tesla Is the New Apple

Tesla has made strides in the field of renewable energy, with the main focus of their business being in the automobile industry. Not a bad industry to be in considering the shift the world is taking from oil and gas to electric, wind & solar as well as other forms of renewable energy such as hydroelectricity. The automobile industry is a quickly changing industry and like time has predicted again and again sometimes old companies cannot see the future. Lots of times it takes a new company to come along to force a large company like Ford, GM, Volkswagen, ex to change. It takes a new company changes the way we look at certain industry’s to really spark change and mass innovation that moves us further. Large companies can rarely not see very far past their own profit, due to this they get stuck. When a new company comes along that has no definitive place in an industry as dominated by the major brands like that of the automobile industry, they have to change something significant and innovative in order to not get swamped in the industry. Once they have done enough to gain market share and recognition they force the large companies to change. Companies that follow this outline are rare, can you think of one?

If you cannot think of one I’ll give you a hint, it’s Apple. During the prime of their innovation when the company was constantly on the verge of death and the need product that would change the world was needed for them to stay on the rise. Think of it this way, when you’re walking on a hill the walk down is quick, but the walk up is slow, if you fall you slide fast so you try to get to the top as quick as you can in order to reach the top. Apple ran up that hill because if they fell, they would slide. They pioneered the first modern day computer, then the iPhone, then the iPod. They grew fast and became one of the large companies in the world. Forcing companies to change was just an everyday thing for Apple. Sadly they have not continued this tradition arguably since Steve Jobs died in 2011.

Tesla is in the stage that Apple was in from when it was founded to when Steve Jobs died. They are creating new technologies that have the ability to change the world and they are running with it. The automobile industry was very stagnant. With safety features being the only thing that companies seemed to be focused on. While safety features are important they are more of an aspect to get customers to buy their vehicle, rather than to vastly improve the car and industry.

So I do believe that Tesla is in a sense the next Apple, as an actual company they are not. Tesla has followed a very similar path to Apple; it has some very real differences. For one Tesla is not a technology company and their product are very limited and they have a strict focus while Apple is more of a broad technology company with more interests and products. They are instead as Apple as more of a template company that has followed Apple in its way that it had changed an industry. While Tesla seems to have more of a narrow path in where it is focused, it is not really a “tech” company, nor is it as broad as Apple.

Tesla is going to become an industry leader in the field of renewable energy and its uses. With companies like GM, Ford, Volkswagen, ex catching up to Tesla, with most of their business in the gas powered vehicles they will be skeptical to changing their entire business plan of a company as big as the ones previously named. Tesla will take control of the electric car industry, which by 2040 will completely dominate gas and oil. They are a company now to invest in long term because in 30 years they may be one of the largest auto companies in the world.

A Rotten Apple?

Apple was first founded on April 1, 1976 in a garage in Cupertino, California by two long time buddies Steve Jobs & Steve Wozniak. They created the first Apple computer in 1976 calling it the “Apple 1” back then it was simply an assembled circuit board. There was no case, monitor or any basic features of a modern computer. If you wanted Apple written in on the computer you had to hand carve it in and place it in your own case that you made, probably made from wood. It has no operating system, no mouse, no HD graphics. If you wanted to do anything on the computer you had to type commands in into the command prompt a long and tedious process that would take far too long for any regular person at home to use. This lack of usability of the first modern computers was the driving factor of why many investors could not see the PC taking off anytime soon. They could not see the future, but Apple could.

During Apple’s heyday of innovation in the early 80’s all the way into the early 2000’s they were the leader. No one could outpace Apple in design ease of use or popularity. The Apple logo became a symbol of clean refined design. They revolutionized the phone and the computer as we know it. Changing how we look at a mobile phone, from a piece of technology limited in its capabilities to a device unlimited in its capability. These were the things Apple was known for, the things that made them the giants that they are today.

Because of Apple’s innovation and its abilities to push the boundaries of technology further, its stock price went soaring. Apple stock made certain people very rich. Steve Jobs and Steve Wozniak were some of these people. Jobs’s stake in the company would have been worth well over 66 billion dollars while Wozniak is worth approximately 100 million dollars today.

Steve Jobs took the helm of the company after a dispute that got him fired, and while he was running the company, Wozniak stayed as more of a silent partner at the company. He mainly focused on Apple projects while Jobs was focused on the corporate aspect of the company. This difference in personality between the two is very evident. Jobs was the stage man, the one who promoted products and ran the company. He had the vision that made the separated Apple from the rest of their competitors. Wozniak was more of a real computer lover, somebody that just wanted to build and work with the machines that made them famous he had the ability to execute their dream and make it a reality.

Back then Apple was known for their innovation and ability to change how we as the consumer looked at modern day technology. They were the pioneers, the trail blazers. They could see what other people could not at the time and it made them very successful. The question now is whether they have kept up that same level of innovation and design that made them who they are today.

Apple stock (AAPL) has been doing very well recently gaining over 50 points in the last year alone. It comes at no surprise that once investors like Warren Buffett and his Berkshire Hathaway invest big in a company like Apple that many will follow. With the recent soar of Apple’s stock there have been many people asking what will come next. Many people have made money off Apple so far, but is it sustained and can the rally last?

Apple has not done a whole lot of innovation like they have in the past. They have continuously disappointed in their recent product releases from the iPhone 7 to the MacBook Pro and many others. It seems that their new strategy is just to disguise a lack of innovation and new features with artificial hype and a marginally sleeker more sexy design that appeals to the user less interested in performance and more interested in the logo on the back of their laptop and phone.

The hype around the iPhone 8 has especially been interesting because it will be their 10th gen phone. Consumers and investors are hopeful that the new phone will excite and be a great performer. If they drop the ball on this phone it may spell disaster for their investors and fanbase. Some of whom are already leaving to go to the Samsung side of things because of the great success of their Galaxy 8 phone that has been a smash hit for consumers. The stock market is banking on what Apple does next and they are hoping that the iPhone 8 will be a hit that can move the company past its current innovation rut into what they used to be.