The Major Problem With AppleAAPL) stock has been range bound over the last few months. The stock is off over 10% from its all-time highs, and the primary reason behind it is that Apple is not a growth stock anymore. Apple still relies on one product for the majority of its revenue, and that product is running out of growing room. Besides, Apple also doesn’t have a generous dividend yield. Hence, both growth investors and dividend investors have preferred staying away from the stock.
In order for Apple to break past the range bound, the company will have to branch out its revenue stream.
Apple is mainly known for its iPhones and iPads, but recently the company has invested hundreds of millions into solar energy to power its business. When the company proclaimed that its operations globally now run on 93 percent renewable energy, no information was mentioned about the companies that build and operate those solar plants.
However, SunPower and First Solar are the two major companies that played a significant role to push Apple into the renewable energy sector and will likely carry on to support the company in the future. Apple has used several tactics to achieve its solar energy goals including purchasing some from utilities, a choice that is open for businesses and domestic consumers in some portions of the country.
On the other hand, Apple is progressively selecting to own solar plants or to get solar power directly from partners such as First Solar and SunPower. Over the past few years, the company has made numerous deals with both the companies like building solar farms near data centers, solar plants in China, etc.
As a matter of fact, the company’s decision to partner with SunPower and First Solar is not shocking considering the robust position of both companies in the solar sector. Both of the companies have distinguished technology and reliable track records of creating projects on demand that generate the projected levels of energy output.
Apple’s presence in the solar sector could also help the company in future product development. At present, the company has not calculated the amount of energy that will be used to power its devices in daily life.
Apart from this, Apple has patented its entrenched solar cell that can be used with touch displays where it would gather solar power. Currently, enormous power consumption in the devices is a big concern. Therefore, the company plans to use solar powered touch screens in its devices to solve the energy consumption issues. If the company successfully develops solar powered touch screens, it would be a big win for the company.
For the time being, I expect Apple to stay under its all-time high levels. The company currently lacks any strong growth driver, which will put investors off. While the iPhone SE can move the needle, it is not a strong enough factor to push Apple past the $130 mark.
Disclosure: I don't hold a position in any of the stocks mentioned in the article.
Published on Apr 12, 2016By Prudent Investor