Can Apple Outperform Markets? Sure -- But Not Forever

Last Updated May 2, 2011 2:11 PM EDT

Investors have begun to wonder whether, given its size, Apple (AAPL) can continue to grow faster than the market. Analyst Toni Sacconaghi of Sanford Bernstein Research thinks it can, and performed some technical analysis to show how further growth isn't historically unreasonable.

It's an important examination, but it only touches on the stock market. There is a more important market to consider: the wireless mobile market. In that context, Apple's growth isn't surprising at all. The company is only keeping with bigger trends.

The fuel of Apple's growth has been mobile computing, specifically smartphones and tablets. Even the resurgence of Macs likely has been the indirect result of mobile, as many who adopted iPhones and iPads decided to shift away from Windows-based PCs. But the real power has not been the singular presence of the iPhone, although it helped spark smartphone adoption, but the sudden shift of people away from traditional "feature phones." Apple is riding on a big trend.

Exploiting hypergrowth in smartphones
According to IDC, in the last quarter of 2010, smartphone shipments were up 87.2 percent year over year. For the same quarter, Apple reported that iPhone sales were up by 86 percent. IDC also expects the global smartphone market to grow by nearly 50 percent this year. Apple grow faster than other wireless handset companies because unlike its competitors, it only does smartphones.

That lets the company benefit from the overall market growth in an exaggerated way. Apple's average handset growth isn't diluted by a slower-growing feature phone product line.

The same is true of the iPad. The new category of product has taken off, and Apple has been the major beneficiary of the market growth, as competitors were slow and ineffective in bringing out competing products. But it's public realization of a new type of device and capability that has set the market on fire.

As Apple sits snugly in what is probably the highest paced growth segment of technology, its revenue growth and, therefore, its market capitalization will continue to leave others behind. That likely means that Apple will continue to perform better than others in the stock market, as well.

Nothing lasts forever
That could change before long, though. The problem that faces Apple is the growth of Google (GOOG) Android and the potential of Microsoft (MSFT) Windows Phone 7 as Nokia's (NOK) platform of choice. Lots of consumers will buy non-Apple smartphones and, yes, tablets. (Remember it wasn't too long ago that many critics dismissed the possibility of Android catching up to iOS in the smartphone market.)

All these companies will continue to see operating system market share go up. In the cases of Apple and Nokia, that also means hardware sales. But Apple will find the pace of its growth slowed as others become more dominant in the market. That may cause panic among investors disappointed that Apple revenue won't continue to grow at the red-hot pace they've gotten used to.

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    Erik Sherman is a widely published writer and editor who also does select ghosting and corporate work. The views expressed in this column belong to Sherman and do not represent the views of CBS Interactive. Follow him on Twitter at @ErikSherman or on Facebook.