This Day On The Street
Continue to site
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here

Apple's Problem in One Chart

NEW YORK (TheStreet) -- The former analyst and newly announced venture capitalist, Benedict Evans, had the tweet of the night in assessing Apple's (AAPL - Get Report) latest earnings results Monday night.

Here's his tweet, Apple growth question in one image. 

It shows Apple's trailing 12-month revenues in billions. And what it shows is that it has hit the top of the S curve. It's mature market time, even though we all think of the smart phone market as new and dynamic.

Horace Dediu also had an interesting visual image in his roundup of Apple's earnings.

Note the bottom left graphic which shows how iPhone's revenue contributions have exploded over the last four years for Apple from a relatively small amount to a juggernaut.

For Apple's stock to start growing again, it has to fix the Ben Evans flat line of the S-curve problem. Of course, as everyone has been talking about, that will take new products. But new products alone which aren't blockbusters will still make it tough for Apple to keep boosting its stock price.

And heaven forbid if the new Apple products are duds. That flat line may even be at risk of contracting if that happens.

And don't think that a stock buyback is a panacea here for Apple. We saw Microsoft (MSFT) do a one-time dividend which was a dud and then followed that up with steady stock buybacks. Yet the stock went down for more than a decade. Why? Investors didn't care about the steady revenue increases every year. They wanted to be dazzled with supernova growth.

Apple right now needs supernova new product growth. I didn't say new product growth. I said supernova new product growth.

Will it be TV? Will it be a watch? Will it be payments? Will it be a phone with a larger screen? It's really hard to say today until we actually see them.

However, to move up from these levels, Apple needs to keep selling all its existing stuff at at least the same pace and then add meaningful new revenue streams. Incremental growth -- even if it's adding new iPhone sales through China Mobile (CHL) or NTT DoCoMo (DCM) for example -- just won't do, from a stock price perspective.

It's still quite possible that Apple can surprise us here to the upside, but when you look at Ben Evans' chart and you think about the sheer size of what Apple sells today, it's no slam dunk to just whip up a few new multi-billion products.

At the time of publication the author had no position in any of the stocks mentioned.

This article was written by an independent contributor, separate from TheStreet's regular news coverage.

Check Out Our Best Services for Investors

Action Alerts PLUS

Portfolio Manager Jim Cramer and Director of Research Jack Mohr reveal their investment tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
Quant Ratings

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
Stocks Under $10

David Peltier uncovers low dollar stocks with serious upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
14-Days Free
Only $9.95
14-Days Free
Dividend Stock Advisor

David Peltier identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Updates with exact steps to take - BUY, HOLD, SELL
Trifecta Stocks

Every recommendation goes through 3 layers of intense scrutiny—quantitative, fundamental and technical analysis—to maximize profit potential and minimize risk.

Product Features:
  • Model Portfolio
  • Intra Day Trade alerts
  • Access to Quant Ratings
Real Money

More than 30 investing pros with skin in the game give you actionable insight and investment ideas.

Product Features:
  • Access to Jim Cramer's daily blog
  • Intraday commentary and news
  • Real-time trading forums
Only $49.95
14-Days Free
14-Days Free
AAPL $93.64 0.00%
FB $118.57 0.00%
GOOG $698.21 0.00%
TSLA $241.80 0.00%
YHOO $36.53 0.00%


Chart of I:DJI
DOW 17,891.16 +117.52 0.66%
S&P 500 2,081.43 +16.13 0.78%
NASDAQ 4,817.5940 +42.2360 0.88%

Free Reports

Top Rated Stocks Top Rated Funds Top Rated ETFs