E Worry Over Apple’s Prospects Justified

There are two disconcerting trends that suggest weakness ahead for Apple (AAPL). The “buzz” for Apple’s iTunes and iPhone is tapering, since peaking on September 9. Since then, Apple’s stock at least recovered, but the falling interest is worrisome.

It’s clearly unfashionable writing anything bearish on Apple at this time. A refresh with the iPhone 6 Plus series was unquestionably a success. Investors should expect further growth in unit sales in the next several quarters. This is due mostly to the device’s growing worldwide availability. Older models are still highly profitable, as they compete effectively against other low-end devices.

The worry starts with the popularity for iTunes. From the releasing of Apple Music, the company’s focus on usability is not as sharp as it should be. For example, there are two context menus for each song in Apple Music on iTunes. In the history section, there’s no option to add the song to the playlist. The section only presents an option for buying it on iTunes.

The small design issues mean Spotify and Pandora (P) will keep up a strong lead, by listener count.

Beats acquisition

When Apple bought Beats by Dre for a $3 billion, the company was supposed to integrate Dr. Dre and Jimmy Lovine’s talent somewhere in Apple’s music offerings. It has yet to show this. The only thing obvious from the acquisition is the offer of buying Beats earphones as an accessory to an iPad or iPhone.

Bottom line

Apple’s stock is very cheap. Its P/E is under 13 and its PEG is around 0.85. For investors uninterested in volatility and dividends (it yields 1.77 percent), Apple is the stock for you. For investors looking for sharp growth ahead, there are other stocks to consider instead.