Apple: Stale but not Rotten

April 29, 2016

By HV

The billionaire activist investor Carl Icahn revealed he had sold his entire stake in Apple, worth $45.8 million, due to concern the company’s growth will hit a wall in China due to Beijing’s resistance.

His concern is well-founded. In March, China adopted new regulations that impose restrictions on online publishing, especially for foreign firms. Apple felt the immediate effect as its Itunes movies and iBooks stores got closed down after a mere 7 months in service.

The new regulations put Apple under the same scrutiny Beijing enforces on every American corporation doing business in the country. Beijing will now control the market share captured by Apple, and the company will be met with increased resistance if it gains too much influence.

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For investors, it’s bad news. China is arguably the biggest market for tech companies, and failing to make a profit there could lead to a plunge in profit. It’s even more alarming for Apple when the phone and tablet markets are becoming saturated.

The news from Icahn sent Apple’s shares down 3%. The shares have fallen for more than 10% this week.

Yet, it’s crucial to look forward when it comes to technology, and with Apple being a tech company, it’s advised to look ahead.

The next production cycle is coming, and investors will want to be in a stock ahead of that cycle to enjoy gains. Fall is Apple’s season of releasing new products, and this fall will see the launch of the iPhone 7, the latest iteration of its flagship product.

Prior to the sales of the iPhone 6, Apple stock did extremely well, reaching $102.50, an all-time high at the time. In fact, new releases have been generating nice returns for shareholders, with the exception of the iPhone 5 launch.

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Apple is one of many U.S. tech companies experiencing slowdown. Both Microsoft and Intel reported disappointing earnings as well. But that’s not to say growth is leaving U.S. tech industry.

Facebook posted revenue of $5.38 billion, smashing previous expectations. Amazon followed suit, reporting the most profitable quarter in its history. Its net income rose to $513 million from a loss of $57 million in the same period a year ago, and its revenue surged to $29.13 billion from $22.72 billion a year ago.

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LinkedIn also had positive things to say about its revenue, which jumped 35% to $860.7 million thanks to a rise in demand for its hiring services and an acceleration in the growth of its advertising revenue.

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