What Apple investors don't get about Tim Cook
If Elon Musk was the CEO of Apple (NASDAQ: AAPL) would the company’s stock price be at 95 right now? Said another way, is Tim Cook ’s low-key approach hurting Apple’s stock price?
Investors are certainly frustrated with Apple as its shares languish below 100. The price makes no sense given that Apple has $250 billion of cash in the bank, a price to earnings ratio much lower than the market and a massive cash flow generation operation despite slowing phone sales. Still, the stock trades below 100 and blame has to be cast somewhere.
Some suggest Apple stock woes are directly related to the slowdown in iPhone sales and there certainly is an element of truth to that perspective. At some point markets become saturated and when that occurs, a product's differentiation needs to be significant enough to trigger buying behavior.
But I have another theory as to why Apple's stock price is low. Think back to when Steve Jobs ran Apple. In between product releases this cult-like figure would whip investors into a frenzy. While it certainly was not the official policy of Apple, one could certainly conclude that his efforts were focused on generating marketing buzz to keep excitement high about the product thereby supporting the stock price. Sound like Musk?
Isn't the same strategy at the core of Tesla (NASDAQ: TSLA)? Every three or six months there's a new pronouncement whether it's the giga factory, home batteries, new models, or new updates to current cars. To say Musk is a brilliant salesman would be an understatement. Think for a moment about the latest $1000 deposit strategy for Tesla's new lower cost model. Tens of thousands of people plunk down $1000 to hold their place in line. The buzz this created was incredible.
Tesla, which has fewer product releases than Apple, is generating incredible excitement and I would make the case that it is directly related to Musk's promotional style. It's not that there's anything wrong with a strategy to keep investor enthusiasm high, but it is a marketing technique to be sure. And that leads us back to Cook.
Cook was the operational expert who did not crave the spotlight when he worked closely with Jobs. When Cook took over as CEO of Apple, the pundits and many investors labeled him as too boring, too conservative, and too low-key. After all, coming off of Jobs, Cook certainly is a bit less exciting to be sure. Under his leadership, Apple is quieter in between product release cycles and is more muted in its declarations.
This type of CEO style can lead to periods of time in between product launches where the stock of the given company simply falls out of favor. There's no one banging the drum reminding people about a huge launch or new innovative products. It's a much more conservative strategy of delivering the product rather than hype.
While the current downturn in Apple stock is disconcerting, it doesn't eliminate the reality that Apple is a company that has massive cash flow. It may not currently have a CEO with the panache or pizzazz of Steve Jobs or Elon Musk, but that doesn't mean the company is in ruins.
We've been here before. Remember back when Apple stock was languishing several years ago and Cook was considered the wrong man for the position. Then suddenly the iPhone 6 came out (as well as a larger iPhone) and then he was brilliant.
My contention is Cook is doing just fine. My contention is he doesn't have to be as exciting as Jobs or Musk. It might sound boring but there's something to be said for the fundamental cash flow generation power of a company rather than marketing flash.
Over the long-term, it's the results that matter not the short-term stock price management techniques of CEOs. What matters is whether company can deliver new product and generate growing cash flow and I believe the likelihood is that will occur with Apple.
My prediction is in the next two years investors will look back at a $90 stock price and ask themselves why they didn't believe in the fundamental story for the stock. The excitement might not be there from the executive suite but the cash flow is there. And cash flow wins in the end.
Commentary by Michael A. Yoshikami, the CEO and founder of Destination Wealth Management in Walnut Creek, California. He is also a CNBC contributor. Follow DWM on Twitter @DestinationWM.
Disclosure: Michael Yoshikami does not own shares of Apple and has no investment-banking relationships with the company. But Destination Wealth Management may buy shares for clients.
For more insight from CNBC contributors, follow @CNBCopinion on Twitter.
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