Is Apple Still A Sweet Investment?

Apple, Inc. (AAPL) has been a powerhouse investment for many years. While the introduction of each new version of the iPhone has had mixed impact on Apple stocks–about half the time, the overnight response was positive and the other half, neutral or negative–the overall growth of the stock has been positive. Apple shares have risen 80% in value in the last five years.

It is perhaps that trend that’s most telling about Apple’s future prospects. The company–founder Steve Jobs, in particular–has always been so innovative that their creations often hit the market a little before the market was ready for them, or at least before the investment world thought it was ready. The lukewarm ticker results seemed to reflect skepticism that didn’t exist among consumers and the scoffs of critics and competitors, but in time even Wall Street acknowledged Apple’s dominance and responded.

An examination of the AAPL stock price shows surges and troughs consistent with any company, but overall growth remains strong. The question is to what extent that suggests future growth, and that issue is best examined in three areas.

Handling The Android Uprising

The hallmark of a strong company is how it responds to competition, but perhaps an even better indicator is that it generates competition. In any product, there is always a market segment that jumps at the new offering immediately. There is also a group that adopts a wait-and-see approach, waiting to hear the reaction of those who camped out at the Apple Store and see what adjustments will be needed.

But a third group just wants to break trends. They don’t want to follow the crowd but instead to create their own crowd. It’s this group that largely fuels the Android competition, and it will always be there.

What is telling about Apple is not that Android devices are selling, but that the company has grown in spite of it. Apple remains a leader and, in large part, leaves other companies duplicating instead of innovating.

Built For Resurgence

Generations of technology are very different from manufactured products. Whereas car manufacturers, for example, typically have a season each year for new models to be introduced, Apple created its own seasons. As a result, they weren’t tied down to a schedule that forced a rush into production or a stale creation.

Hence Apple can keep its own schedule, surprising its salivating fans with models that release earlier than expected or building anticipation to a fever pitch with a more deliberate rollout. It’s not just a marketing strategy, though. It’s a reflection of their ability to monitor consumers and competitors, incorporate upgrades, and throw a counter-punch–followed by a new punch of their own.

Innovation Never Stagnates

Apple has also driven the market from the first iPhone. The 2G model couldn’t even make video; the 7 shoots high-definition. The technology treadmill is nothing new, but as we noted earlier, Apple is giving people what they want before they even know they want it, then showing them why they want it. It’s a recipe for success.

We have focused heavily on the iPhone, but Apple is a much more diversified company than that. Sales of iPads and iMacs remain strong, giving the company a diversified product line that helps it to weather variations in phone profits.

Apple found its way to the front of the pack after years as an also-ran. They did it by finding gaps in the market, then filling them better than anyone else could. People working in desktop publishing and, later, music had known it for years long before the first iPhone placed a call. But when they hit with it, they hit big. It wasn’t a case of luck but a well-managed business strategy that perhaps says more than anything about how Apple is built for success, and there’s no reason to think that has changed.