Is Apple’s Bubble Expanding Or Ready To Burst?

Do you remember back in September of 2008 when the news came over the wire that Lehman Brothers was in trouble?  They were in deep trouble.  And so were many other of the world’s largest financial institutions.  It didn’t all happen that day, however, it actually started a long time before that.  It represented a bubble that had burst.  And in 2000 we saw another bubble burst, the dot com fall.  Looking back we can surmise that whenever you see a sharp increase in something then it’s a pretty good bet that it will come down.  Is Apple reaching this point?

The Facts Please

Let’s look at some facts to support our theory that a bubble is forming.  Take a look at this chart:

As you can see, we have evidence of a continually rising stock price.  But this simply isn’t enough information.  Here are some more interesting facts:

  • Macs are more than doubling the growth of the PC industry average of 22 percent thanks to strong iMac, MacBook and MacBook Pro sales.
  • Despite decreasing sales, the iPod continues to represent about 70 percent of the media player market in the U.S., and is the top-selling device internationally in most markets.
  • The iPhone had a blowout quarter with more than 14.1 million units sold, up 92 percent year over year, compared to 64 percent for the industry average. It’s now available in 89 countries, and being piloted or deployed by 80 percent of Fortune 100 companies. While there’s still a “sizable backlog” of orders, supply/demand equilibrium is getting closer.
  • The iPad is being met with “great enthusiasm” in 26 countries and 66 percent of Fortune 100 companies. Supply channel inventory is now 3 to 4 weeks, less than the 4 to 6 desired, but enough so that additional partners and countries can start to sell iPads.
  • Sometime in September, the 125th million iOS device was sold, up from 100 million in June, meaning Apple is now tracking at 100 million iOS devices sold per year and growing.
  • Retail saw nearly 75 million visitors, up from 50 million a year ago. 874,000 Macs were sold at 317 Apple Stores worldwide, “about half” to those new to the platform. The company plans to open between 40 and 50 new stores in 2011.

Additionally, another story that broke was the increase in Apple’s retail stores.  From The Apple Blog, “Further increasing its reach, Apple plans to open 40-50 new stores in 2011, with half of those overseas, and it plans to renovate many existing stores to reflect its new product lines and achieve ‘service goals’.”

The Rise

Clearly you can see that things are rising.  A lot of things are rising.  And rapidly.  Now lets shift to another interesting story.  Apple has ventured into the Social Networking world with Ping.  That’s no surprise.  But about a week ago Steve Jobs met with Mark Zuckerberg to apparently discus the integration of Ping with Facebook.  This, of course led to even more rumors that Apple may want to buy Facebook.  They certainly have the cash to do it but I really don’t believe that would ever happen.  The point here is that they are entering into another growth market which is Social Networking.

The Fall

So, will Apple’s sharp rise mean that the bubble is about to burst?  Or is that bubble going to continue to expand?  Bubbles cannot last forever but they don’t have to burst.  They can just contract a little and the grow some more.  Perhaps that’s what will happen with Apple.  They do, however, need to be careful with too much exposure.  There is a mathematical theory that says when you use up all your resources (over exposure) people will get bored and wander to something new and promising.  It’s called the Levy Flight.

Eventually things will have to balance out.  Apple has been on an amazing run for the past few years and it’s actually quite phenomenal to see what they are able to produce.  They brought digital music to the mainstream, they brought us the iPod, the iPhone, and iPad, and now Apple TV.  It seems like nothing can stop them from continuing to grow and increase market share.

I just keep reminding myself that eventually…..what goes up, must come down.  The question is, how will it come down?

Thoughts are welcome.

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