Continuation of AAPL (Part 2)….The company was selling at $2 a share in 2002 for a few reasons. After growing at a brisk pace between 1997 and 2000 the company’s overall sales collapsed 33% percent in the fiscal 2001. Delivering a net loss of $25 Million in the process. This was the company’s first loss since 1997. Yet, there was nothing malicious behind the revenue drop. The US economy and the tech sector in particular were going through a major readjustment at the time. As the worldwide economy came to screeching halt and the Nasdaq collapsed, so did sales at Apple.
To summarize, by 2002 Apple was just another computer company, although with a cult like following, that was trying to survive during an economic downturn. With the Nasdaq down 80%, cut throat competition and no “must have” products, the future looked anything but certain. Hence the $2.00 a share stock price.
Yet, as was suggested above, things were about to improve for Apple. In conjunction with iPods starting to become incredibly popular, Apple introduced iTunes in 2003. As a result, in fiscal 2003 alone, iPod sales grew 141% from $143 Million to $345 Million. While this number was still less than 6% of the overall revenue, it gave investors a preview of what was to come. By the end of fiscal 2006 the company was generating $7.6 Billion in iPod sales and $1.9 Billion in iTunes sales. Representing staggering growth and accounting for 50% of Apple’s $19.3 Billion revenue base at the time.
While impressive, Apple was just getting started. Steve Jobs followed iPod’s incredible success by launching iPhone in 2007, Apps Store in 2008 and iPad in 2010. The rest, as they say, is history. By the end of fiscal 2013 Apple was generating $171 Billion in sales, with the following products generating the bulk of the revenue.
Net Sales by Product 2013:
- iPhone $ 91.2 Billion
- iPad $32 Billion
- Mac $21.5 Billion
- iPod $4.4 Billion
- iTunes, software and services $ 16 Billion
- Accessories $5 Billion
The best way to look at Apple’s success over the last 12 years is as follows. While Apple’s existing Mac line grew on its own accord, Steve Jobs was able to create $143 Billion in additional revenue out of thin air by creating/introducing revolutionary new products such as iPod, iTunes, iPhone and iPad.
For our purposes, we must ascertain if it would have been possible to predict this meteoric rise and take position in the stock around 2002-2003 from the fundamental perspective alone.
The short answer is NO.
To Be Continued Tomorrow……
