Now they are beginning to wonder whether Apple’s days as a growth stock are coming to an end.
With sales increases of Apple’s prime product‚ the iPhone‚ projected to decelerate‚ and no clear new blockbuster device on the horizon‚ the era of the company’s producing 50% or 60% annual revenue growth may be on the wane.
When Apple reports earnings today, investors will be scouring the results for signs of how fast that downshift is happening.
Already‚ some investors have begun to treat Apple in a new way: as a “value” stock‚ a label typically attached to companies that generate predictable business results or a reliable dividend‚ rather than delivering runaway revenue growth.
Value stocks often command much lower valuations than growth stocks.
BMO Global Asset Management fund manager Ernesto Ramos said: “People were in love with Apple because hits like the iPod and iPhone created phenomenal growth.
“As investors shifted their minds around the fact that it’s no longer going to deliver the same sort of huge growth over the next five years‚ [it] became a value play.”
Ramos said his firm still owned Apple in some of its growth funds‚ but began including the stock in value funds in mid-2013.
The change has important implications for Apple.
While a technology sector company like Netflix is regarded as a growth stock because its revenue grew 22.8% in the most recent quarter from the previous year‚ value stocks include ageing tech giants like Cisco‚ Oracle and Intel.
Being lumped in with those behemoths would be a perception shift for Apple.
Beyond that‚ switching from being a growth stock to being a value stock can be a long and painful process.
Growth investors need to sell a company’s shares and drive the price down until it is low enough to tempt value investors‚ who buy stocks they think are cheap compared with the intrinsic value of the company.
In the tech industry‚ a shift from growth to value also often signals to investors that a company is facing newer competitors with more innovative products‚ raising the question of how relevant the company can remain.
S&P Capital IQ senior analyst Angelo Zino said: “Investors don’t like to see the words tech and value combined because when growth slows at a tech company‚ it usually means something essentially is not working.”
An Apple spokeswoman declined to comment.
Any change would have repercussions beyond Apple because its soaring performance in recent years helped lift the broader market.
If Apple shares were removed from the equation‚ the performance of the S&P’s 500-stock index in five of the past seven years would drop about one percentage point‚ according to data from S&P Dow Jones Indices.
In 2014‚ for instance‚ the index rose 13.7% with Apple and 12.9% without Apple.
The Apple effect is even more pronounced when technology names are isolated.
For tech stocks on the S&P 500 as a group‚ annual gain in 2009 declined about six percentage points when Apple shares were not included‚ dropping to 56% from 62%.
Apple’s effect became more muted last year as its growth decelerated‚ according to the data.
Investors have turned to Facebook‚ Amazon‚ Netflix and Alphabet‚ which owns Google – collectively referred to as the FANG stocks – for growth.
