Home Daily Blitz The Time To Short Apple Is Not Here … Yet

The Time To Short Apple Is Not Here … Yet


marketwatch articleThe following is an excerpt from Thomas H. Kee Jr. | November 20, 2015 | marketwatch.com |

In no uncertain terms, Apple is telling us, without telling us, that its phone business is saturated. Clearly there is more market share that is possible, but domestically, we had a degree of saturation a couple years ago. This was largely true in Europe, too, but China Mobile came on board and boosted sales, but now that may be saturated as well. But what does that mean for the shares?

We will not be sure until after more data comes in, but the shift identified by Goldman Sachs is a tell that should not be ignored. Goldman Sachs believes that Apple AAPL, +1.27% is transitioning from a hardware model to a service model, which means they are shifting their growth focus away from phones and onto monthly subscription costs, like for the iCloud and music, in addition to others.

I do not think Goldman is wrong, and in fact, I believe that Apple sees the need to find growth from new sources. This is a direct result of mobile-handset saturation, but the audience that Apple has captured allows them to access customers directly and immediately, where competitors like Pandora P, +1.26% for example, need to seek out customers. That's a material difference, and a competitive advantage Apple will have in a service-focused environment.

But there is a problem.

The problem is that Apple is not the best at providing services like that. They are okay, arguably good, but their wheelhouse is hardware: mobile phones, laptops and computers. In venturing into a service-growth-oriented model, Apple is moving into uncertain waters, and investors must recognize that.

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