Macbook Air – Today we have a WiFi connectivity issue with the new Macbook Air, as complaints about continued signal-dropping abound on message boards. According to All Things D, “the issues appear to be fixed once they update the firmware on their at-home Wi-Fi routers, or switch modem channels — which may say more about their routers than it does about the machine.”
Granted, but once again, all these negative associations are being created around the Apple Inc. (NASDAQ:AAPL) product. “My last computer worked fine with the router, but my new Macbook Air doesn’t?!”
How this affects Apple’s stock
Apple’s brand is one of its biggest assets, rated as the second most valuable brand in the world behind only Coca-Cola. A short-sighted MBA acknowledging that he willfully puts short-term profits ahead of the consumer experience in the retail store is pretty major, an example of management thinking of short-term stock price versus the long-term health of the company.
The question I have as a shareholder: “When do these individual incidents, added together, ultimately detract from the experience Apple is trying create?” When will it take some of the luster off Apple’s halo, and it just becomes another company, instead of Apple?
I’m not ready to say we’re there yet, but I want Apple Inc. (NASDAQ:AAPL) to behave more like it did under Steve Jobs.
Competition and price
When you’re on top of the world, people are going to take their shot at you. The fact that Apple’s margins are declining should come as no surprise as Google, Microsoft Corporation (NASDAQ:MSFT), and Samsung all try to take a chunk of Apple’s profits.
Microsoft trades at a PE of nearly 18. Granted, that includes a hefty accounting charge regarding a bad acquisition in a recent quarter, but then again, Microsoft has had a history of such acquisitions, especially compared with both Apple and Google. The company continues to co-opt equipment makers into producing its Windows Phone, with HTC being the latest, but its once formidable moat is under continuous attack from nemesis Google. Also, Microsoft will never have the loyalty that Apple does because it simply doesn’t make the same top-notch products and provide the consumer experience.
Google trades at a PE of 26, which means that investors are pricing in a substantial amount of growth. Of course, as I discussed, Google does have a lot of super-exciting products coming, including the driverless car, which has enormous potential.
Of the three stocks, Apple is priced most cheaply, with a PE of 9.5. If you back out cash per share (imagine a $145-per-share dividend) you get a PE ratio of about 6, not including property, plant, and equipment. This means Wall Street is anticipating negative earnings growth for the company.
Bottom line
Should Apple surprise on the upside, or introduce a new revolutionary product, the stock has nowhere to go but up. However, be mindful that if, what I consider Apple’s most valuable asset – its brand – continues to be tarnished, the current stock price might just be justified. However, I believe there is more upside than downside at this price and am a buyer of Apple Inc. (NASDAQ:AAPL) at these levels.
Margie Nemcick-Cruz owns shares of Apple, Microsoft, and Google. The Motley Fool recommends Apple and Google. The Motley Fool owns shares of Apple, Google, and Microsoft.
The article Is the Shine Coming off Apple’s Halo? originally appeared on Fool.com.
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