Apple’s shares are famously, and somewhat mysteriously, cheap. The company has doubled its earnings per share over the past year but the stock has a below-market valuation. The discount may have to do with consumer technology companies’ tendency to enjoy rapid rises and equally fast declines.
But one Apple product line seems eternally young: Macintosh computers. Thirty years on, it is still growing. Annual revenue has reached $23bn. Computer prices always drop but Macs drop the slowest. Unit sales are marching up. Contrast the product that sparked Apple’s renaissance: the iPod. Apple has protected its price but volumes are now in steady decline.
One might sum up the debate about Apple’s prospects and valuation like this: will the iPhone and the iPad (two-thirds of Apple’s sales) drink from the fountain of youth, as the Mac has, or prove mortal, like the iPod? Admittedly, Apple has not lost iPod customers, but upgraded them to pricier iPhones. But it is not written that this upgrade pattern is repeatable.