Apple, Facebook And The Myopic Wall Street

Apple’s stock took a hit yesterday after announcing disappointing numbers in its financial report. While these numbers weren’t particularly good according to Wall Street’s standards, it’s hard to call them bad. Apple still made over $10 billion in profits last quarter, something many companies would be envious of. But as a publicly traded company, Apple is playing by Wall Street’s rules and Wall Street wants more. It’s hard to impress the financial place when your products’ growth seems to be stalling and you fail to impress it with a new shiny product (apparently the Apple Watch is a flop, a $6 billion-in-revenue flop). Facebook in contrast has published a great financial quarter, with sustained user growth, notably in developing countries, where mobile Internet is growing fast. Facebook announced over $5.3 billion in revenue and $1.5 billion in profits. More users means more eyeballs reading ads, which means more revenue in the near future. This upward trend in growth is the type of news Wall Street likes. It gives enough visibility short term to reassure investors and analysts alike and to reinforce trust, which sent Facebook’s stock upward in after-hours trading.

But Wall Street’s view is myopic. It is impressed by news of growth short term when it should look for long term stability. Much like the subprime bust in 2008, where toxic bonds were used for years to make profits and eventually led to a catastrophic, global financial crisis, Wall Street is dazzled by short term gain and fails to understand the long term game that Apple is playing by optimizing its product range and consolidating its customer satisfaction, making Apple one of the most iconic and respected brand worldwide, a brand which has been in the making over four decades. Seeing user growth is one thing but retaining users and having them become loyal to your products is something that few companies have achieved. Tesla is another example of customer loyalty and trust, having manage to get more than 300,000 people preorder its latest Model 3 which will be available only late 2017. A feat that no other car manufacturer has been able to pull off and that can only be achieved by brands having very loyal customers. This level of trust is built over the years and cannot be played with using cheap marketing tricks and seeking double digit growth at all cost. It takes time and respect for the end users.

So Apple may have had its first bad quarter in 13 years and lost $40 billion in market cap in less than an hour, but Apple has weathered bigger storms and Wall Street’s myopic view of the future is a testament to its greed and lack of understanding of what Apple is about: making our digital lives better by designing products that both delight and empower us.

So rest assured that Apple’s stock will bounce back, as it always has, and maybe one day it’ll reach the ever elusive $1 trillion market cap mark.