Apple’s ‘Secular’ Problem, Per T Rowe Price


No matter how many iPhones Apple (AAPL) sells next year, or the year after, or the year after that, the company continues to have a problem with some big money investors, as pointed out by a presentation Tuesday morning by Ken Allen, a portfolio manager specializing in tech for T Rowe Price.

T Rowe held its Global Market Outlook conference in midtown Manhattan. I was there, and heard Allen tell investors Apple is “the one least likely to still be as dominant five years from now,” compared to other tech giants, including Microsoft (MSFT), Alphabet (GOOGL), and Amazon (AMZN).

Its best days are happening as we speak,” said Allen of Apple.

That may seem like an improvement from the attitude around Apple in 2011 and 2012, when co-founder Steve Jobs passed away. At that time, some people — including Oracle‘s (ORCLLarry Ellison, as noted at the time — said Apple’s best days were already behind it.

But Allen, who doesn’t own Apple stock, but owns shares of the other tech giants, sees a continued problem for Apple: the “secular” challenge. Secular is one of those terms that just means “long-term,” in Wall Street parlance. But it shows that despite continued excitement around Apple products, everyone keeps expecting the tech trend is not Apple’s friend.

His view is likely not alone, as T Rowe, with nearly one trillion dollars under management, doubtless speaks for others in the big, big money bracket of investing.

“I underestimated how the product cycle would do for them, in terms of boosting iPhone prices,” Allen told me of Apple, during a chat after his formal talk. He was referring to the prospect that the high-priced iPhone X will boost Apple’s average selling price for devices this year, a view now widely shared on Wall Street.

“But I don’t focus on product cycles, I focus on the secular,” said Allen. He means things like autonomous driving, “digitization,” cloud, and other themes of investing where Google and Microsoft and Amazon all seem to have better prospects than Apple.

“And that’s not the secular trend you want to invest in?” meaning, the iPhone X roll-out, I asked Allen. “That’s right,” he said.

Unspoken, perhaps, in Allen’s view of things, is that Apple is still a company largely driven by making products it thinks human beings want to use, such as the iPhone. Amazon’s “Echo” devices, and Google’s self-driving cars, put the human being farther and farther from the epicenter of technology.

It’s time for the robots to take over, and Apple doesn’t yet have a narrative for that particular secular trend that will satisfy Wall Street.

Apple shares today are down $1.67, or 1%, at $172.30.

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