Not only is Apple not peaking, it is likely not even close to
reaching its potential earnings in its two biggest markets,
smartphones and tablets. Indeed, I suspect that one of the reasons
Apple’s share price is so low is that it has been difficult, on a
purely perceptual level, for investors to understand the financial
opportunities the company is poised to realize. The numbers are
just too big; it simply doesn’t seem possible that a single
company could capture such a large part of the market. But not
only is it possible — it is happening. The iPhone accounts for
only 9 percent of the market share in smartphones, but Apple is
earning 75 percent of the profits in smartphones. Its dominance in
the tablet market is even more staggering.
I think one reason why Apple’s stock price has started to rise again regards the rule of thumb that investors dislike uncertainty. Especially in broad, simple terms. Steve Jobs’s health was uncertain. Apple’s ability to thrive without Jobs was uncertain. Tim Cook’s leadership was uncertain. I think we’re getting to the point now where the market, collectively, thinks Apple is going to do just fine with Cook as CEO.