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Can Competitors Take a Bite out of Apple’s Profit Margins?

Apple is now the biggest company in the S&P 500. The last three tech companies to reach Apple’s position had a hard time maintaining it – Microsoft, Cisco and Intel all saw their stock prices drop dramatically afterwards. Interestingly enough, Apple’s profitability does not come from selling more phones or computers than any other tech company – it doesn’t. We believe it comes from having higher profit margins than their competition. Apple’s products are well designed and fashionable, which is great for being able to charge a premium on its products today, but consumer tastes are fleeting. This may not be a sustainable way to earn profits.

Sony is a great example of what can happen to a company that relies on fashion. The company was once more profitable than it is today, and had a popular music device some may remember-the Walkman. It has since lost a lot of its profitability and market value.

How do you know whether Apple will become like Sony? There really is no way to predict consumer tastes, and that’s why investors should focus on the valuations of the companies they own. When Apple’s valuations are more attractive than they are today, it may make a good investment. Today, the stock simply looks too expensive.

 

Important Disclosure Information

Please remember that different types of investments involve varying degrees of risk, including the loss of money invested. Past performance may not be indicative of future results. Therefore, it should not be assumed that future performance of any specific investment or investment strategy, including the investments or investment strategies recommended or undertaken by RegentAtlantic Capital, LLC (“RegentAtlantic”) will be profitable. Please remember to contact RegentAtlantic if there are any changes in your personal or financial situation or investment objectives for the purpose of reviewing our previous recommendations and services, or if you wish to impose, add, or modify any reasonable restrictions to our investment management services. A copy of our current written disclosure statement discussing our advisory services and fees is available for your review upon request. This discussion is not a substitute for personalized advice from RegentAtlantic. This information is current only as of the date on which it was sent. The statements and opinions expressed are, however, subject to change without notice based on market and other conditions and may differ from opinions expressed in other businesses and activities of RegentAtlantic. Descriptions of RegentAtlantic’s process and strategies are based on general practice and we may make exceptions in specific cases.

Please note that this is not a recommendation to purchase any stock discussed in this article.

Important disclosure information

Please remember that different types of investments involve varying degrees of risk, including the loss of money invested. Past performance may not be indicative of future results. Therefore, it should not be assumed that future performance of any specific investment or investment strategy, including the investments or investment strategies recommended or undertaken by RegentAtlantic Capital, LLC (“RegentAtlantic”) will be profitable.

Please remember to contact RegentAtlantic if there are any changes in your personal or financial situation or investment objectives for the purpose of reviewing our previous recommendations and services, or if you wish to impose, add, or modify any reasonable restrictions to our investment management services. A copy of our current written disclosure statement discussing our advisory services and fees is available for your review upon request.

This article is not a substitute for personalized advice from RegentAtlantic. This article is current only as of the date on which it was sent. The statements and opinions expressed are, however, subject to change without notice based on market and other conditions and may differ from opinions expressed in other businesses and activities of RegentAtlantic. Descriptions of RegentAtlantic’s process and strategies are based on general practice and we may make exceptions in specific cases.

RegentAtlantic does not provide legal or tax advice. Please consult with a legal and or tax professional of your choosing prior to implementing any of the strategies discussed in this article.

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