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Bad News May Show That Apple Inc. Has Lost Its Way

Tom Taulli

Some tech companies can continue their strong growth for many years, as seen with Microsoft Corporation (NASDAQ:MSFT), Cisco Systems, Inc. (NASDAQ:CSCO), Intel Corporation (NASDAQ:INTC) and Dell. But of course, the good times will inevitably come to an end — and sometimes this can be quite abrupt.

So then, perhaps we may be seeing something happening at Apple Inc. (NASDAQ:AAPL) As with anything in the tech industry, it’s tough to predict. But I still think there should be concern for AAPL stock. Keep in mind that there have been a spate of ominous news lately.

Let’s take a look.

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Bad News for Apple Stock: Phone Addiction

This week, institutional investors Jana Partners LLC and the California State Teachers’ Retirement System sent a letter to AAPL management warning of the risks of smartphone addiction for children.

Granted, these firms have only about $2 billion in holdings. But then again, as Apple has become a global power, the company is often at the center of social issues.

In the case of phone addiction, there is research that points to problems like depression, anxiety and antisocial behaviors. Over the years, AAPL has made some attempts to put safeguards in its devices (one notable example is a feature to warn drivers if the phone is in use while a car is driving). But the company will probably need to be even more proactive.

More Bad News for Apple Stock: Delays

Apple CEO Tim Cook is a maestro when it comes to logistics and supply-chain management. These skills were critical in the turnaround of the company.

But unfortunately, Cook’s abilities have been challenged during the past year or so. Note that there have been a variety of delays, such as for the iPhone X, Apple Pay Cash and AirPods.

It’s true that these products are exceedingly complex and require coordination among a large number of global suppliers. But regardless of the reasons, the delays are already having a negative impact.

Just look at the HomePod, which is an in-home smart speaker. It was supposed to hit the markets on December 1 – but has since been pushed to sometime early this year.

In the meantime, Amazon.com, Inc. (NASDAQ:AMZN) and Alphabet Inc (NASDAQ:GOOG, NASDAQ:GOOGL) have wasted little time in capitalizing on this. Consider that the smartspeakers from these companies have been selling like hotcakes. As a result, AMZN and GOOGL are quickly becoming the dominant players in this important market category.

And More Bad News for Apple Stock: The Battery Controversy

A key part of the vision of Steve Jobs was to focus on the customer — with the goal of building the best products possible. But perhaps this approach is, well, weakening?

With the revelation that AAPL has been throttling batteries on older phones, there has suddenly been quite a bit of concern that the company is losing its way. While the story is far from clear-cut (the company said the practice was meant to prevent the shutdown of phones), the fact remains that the company was not transparent about the practice. And this could mean a hit to AAPL stock. In response to the controversy, there will now be cut-rate replacement batteries as well as a new software update for the battery performance.

According to a report from Barclays PLC (ADR)(NYSE:BCS), AAPL may suffer as much as $10 billion in lost revenues for 2018.

Bottom Line on Apple Stock

Despite the emerging issues, AAPL still remains a great company. But again, things can easily slip away, especially given the intensely competitive environment.

What’s more, there are already signs that the iPhone X has not ginned up much excitement. And besides, there are indications that consumers are less willing to upgrade their phones as frequently.

So given that AAPL stock has already had a big run — up 48% to in the last 12 months — it’s probably not a bad idea to think about taking profits right now.

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Tom Taulli is the author of High-Profit IPO StrategiesAll About Commodities and All About Short SellingFollow him on Twitter at @ttaulli. As of this writing, he did not hold a position in any of the aforementioned securities.

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