A few months ago, I blogged about Apple and its product commercialization efforts. Apple’s market capitalization, which was approaching $1 trillion just before I wrote the blog, reflected investors’ expectations that CEO Tim Cook would continue to exploit Apple’s innovation capabilities and introduce a steady stream of “WOW” new products. The hallmark of Apple’s strategy under Steve Jobs was the creation of new product categories such as the iPod, iPhone, and iPad. Just as important was Apple’s creation of a digital eco-system including iTunes, apps on iPhone and iPad, and iOS.
Apple's market cap of over $600 billion is by far the highest stock valuation in the world. This valuation has been driven by Apple's success in new product development, particularly with the iPhone family, which represents over 60% of Apple's profits. Historically, a substantial new product innovation premium has been priced into Apple's valuation.
Apple's stock price has been under pressure recently. Apple reached a post stock split record high of $122.07 on July 20, 2015. Some analysts were forecasting that Apple would be the first company to reach $1 trillion in valuation. On August 24, 2015 Apple's stock price is just under $107, a 12% decline from the July 20 high.
Some of this decline is caused by softness in the Chinese market, which is critical to Apple's growth. But a significant portion of the decline occurred before the very recent troubles in China and the devaluation of the Chinese currency, the yuan. Analysts are concerned that Apples' robust product innovation machine has hit a pothole.