The following is an excerpt from Katie Benner | January 24, 2016 | Nytimes.com |
SAN FRANCISCO — Investors have long relied on Apple to deliver one crucial attribute: growth. Now they are beginning to wonder whether Apple’s days as a growth stock are coming to an end.
With sales increases of Apple’s prime product, the iPhone, projected to decelerate, and no clear new blockbuster device on the horizon, the era of the company’s producing 50 or 60 percent annual revenue growth may be on the wane. When Apple reports earnings on Tuesday, investors will be scouring the results for signs of how fast that downshift is happening.
Already, some investors have begun to treat Apple in a new way: as a “value” stock, a label typically attached to companies that generate predictable business results or a reliable dividend, rather than ones that deliver runaway revenue growth. Value stocks often command much lower valuations than growth stocks.
“People were in love with Apple because hits like the iPod and iPhone created phenomenal growth,” said Ernesto Ramos, a fund manager at BMO Global Asset Management, which manages $18 billion and counts Apple as its largest holding. “As investors shifted their minds around the fact that it’s no longer going to deliver the same sort of huge growth over the next five years, the stock became a value play.”
Mr. Ramos says his firm still owns Apple in some of its growth funds, but began including the stock in value funds in mid-2013.
The change has important implications for Apple. While a technology-sector company like Netflix is regarded as a growth stock because its revenue grew 22.8 percent in the most recent quarter from the previous year, value stocks include aging tech giants like Cisco, Oracle and Intel. Being lumped in with those behemoths would be a perception shift for Apple.
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