Apple Not the Prettiest Girl in the Room Anymore

By "The Greek"

Darling Apple has captivated the hearts of investors and drawn the money of Americans for years. The company has endeared us to buy both its appealing products and its attractive stock. But in light of its 35% price depreciation since September 2012, Apple (Nasdaq: AAPL) is no longer the prettiest girl in the room. With sexy ladies like Expedia (Nasdaq: EXPE) up 95% in 2012, classy mommas like Whirlpool (NYSE: WHR) higher by 106%, rehabilitated hotties like PulteGroup (NYSE: PHM) up 110%, and wealthy cougars like Bank of America (NYSE: BAC) up 99%, who needs her.

She wowed us with her new styles, with her innovative iPod, iPhone and iPad, but now all the other stylish telecom and tech girls have copied her, with Google (Nasdaq: GOOG), Samsung (OTC: SSNLF.PK), Microsoft (Nasdaq: MSFT) , Nokia (NYSE: NOK) and Blackberry (Nasdaq: RIMM) offering competitive fashions. Like in all Greek tragedies, Apple’s biggest problem is Apple. She got too big and popular, and perhaps now boasts an ego that makes her vulnerable to up and comers with nothing to lose and the right hunger to win. Earning upward of $50 billion in revenue per quarter, Apple has grown too large to grow fast. What was once 71% average annual EPS growth over the last five years has become 14% projected growth for the next five.

One of, if not the best performing stock of the last decade, may be AAPL, which gained 6,558% since the close of 2003 through its September 2012 high of $705. The company’s 2012 performance actually helped the tally higher, with the stock up 33% last year even despite its downturn in the fall. Still, our old girl is suffering from a hangover in 2013, down 14% or so in January. That’s the worst month in the stock’s history.

Best S&P 500 Performers of 2012	Percentage Gain
Sprint Nextel (NYSE: S)	+138%
PulteGroup (NYSE: PHM)	+110%
Whirlpool (NYSE: WHR)	+106%
Bank of America (NYSE: BAC)	+99%
Expedia (Nasdaq: EXPE)	+95%
Lennar (NYSE: LEN)	+91%
Marathon Petroleum (NYSE: MRO)	+85%
Seagate Technology (NYSE: STX)	+85%
Tesoro (NYSE: TSO)	+77%
Gilead Sciences (Nasdaq: GILD)	+73%

Our once favorite baby doll could turn things back around before she falls too far off the pedestal, if only she would do what made her prom queen to begin with, innovate. I said it before and I’ll say it again, the smart Apple television must be the little lady’s next product development move. Her brand appeal would immediately make an imprint in television market share. And Apple has got to speed up its penetration in China, and pull some fuel for growth from that country’s burgeoning middle class.

At a P/E-to-growth ratio of just 0.7 now, AAPL should outperform the market. However, with concerns about its future growth at the fore, and with its current market share threatened, the long-term outlook remains sketchy; that’ even despite her sweet operating system. Our girl has got to get her mojo back, and I think the stock will get a facelift from the introduction of a smart TV later this year. So I’m not giving up on her just yet. It may even be time to buy Apple stock again. Call me a sentimental sucker for a lovely lady I guess.

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