Apple Share Price: Is the Great Bull Run Over?

Lack of innovation seems to be hitting at Apple’s share price. On Tuesday 28th January the price of Apple shares dropped to $500, and on Wednesday it briefly nudged underneath this milestone level. Apple has long been known for innovation and for inventing products that people did not know they wanted until they existed. This aspect has been lamentably missing in recent announcements.

The iPad Air and Mini, together with the iPhone 5S and 5C, were announced in October 2013, and the company reported the third consecutive record sales for the holiday season. The last three months of 2013 saw more than 50 million iPhones and about half that number of iPads move off the shelves, and these numbers were both records for a single quarter. The revenue was reported at $57.6 billion.

However, the net profit for the fourth quarter came in at just over $13 billion, the same as the previous year, and Apple’s profits for 2013 as a whole were down 80% from 2012. Analysts are doubtful that the current range of products will be enough to stimulate the earnings figures, and on Wednesday both Oppenheimer and Raymond James, investment analysts, downgraded the outlook for the shares.

It should not be surprising that Apple’s outlook is presently not well regarded. Apple has consistently come up with new products to boost its sales, and the lack of any apparent innovation recently inevitably pulls its perceived value down. For instance, simply look at the growing lack of interest in the iPod, which is now functionally contained in the iPhone or any other smart phone. Even given the following of the iPhone compared to other smart phones, that market is not open to the growth that Apple requires to continue its outstanding performance. What it would take is another dramatic shift in focus, perhaps to some novel wearable device, which seems to be the next direction.

It’s interesting to note that Carl Icahn, a far from naïve investor, is continuing to purchase Apple shares. He has announced three separate purchases of half $1 billion worth of shares in the last week, and the total that he has spent accumulating Apple shares is now more than $4 billion. While this seems a lot, it is still less than 1% of the company’s value, but it is certainly noticeable to others in the market.

One of Icahn’s hopes is that Apple will increase dividends and repurchase its own shares, both of which could push the price up from its current level. The company currently plans to spend $100 million on these expenditures, which he says is not enough. Icahn as an activist investor has a sufficiently high profile that he may influence many others to join in his appeal.