Remembering 9/11 and wondering if Apple can get its mojo back.

September 11, 2024

It's been 23 years since the September 11, 2001 attacks (commonly referred to as "9/11"). These were a series of coordinated terrorist attacks carried out by the militant Islamist group al-Qaeda against the United States on September 11, 2001. Almost 3,000 people lost their lives on the attacks. A few trillion dollars were spent (indirectly invested) in the War Against Terror that ensued after the attacks. As with all wars, the expenses translated into many technological advancements. Wealth creation in the United States since the 9/11 attacks, especially in the digital technology sector, has been incredibly amazing.

Of the many technology companies that created trillions in wealth in the past 23 years, the most remarkable in our opinion has been Apple. Unfortunately, it seems that the fruit is finally losing its mojo. Apple seems to have peaked and may soon begin a slow yet steady trail downhill.

While Apple may very well remain a solid investment and a financial stronghold for many years to come, paying good dividends as a value company, it seems virtually impossible for Apple to replicate its past success. It seems virtually impossible for Apple to have as good 23 years into the future as the ones it had in the past since 9/11. Apple was then valued at $6 billion. Today, Apple has a market cap of $3.35 trillion. Do the math.

Below let's a take a quick look at the 9/11 attacks just to honor the victims and their families in this day of remembrance. Then, let's take a quick look at Apple's remarkable (and unrelated) journey since then. There's no connection between the 9/11 attacks and Apple's success other than the fact that the U.S. Government's investments on digital technology helped the entire sector. Apple's success since 9/11 also help to illustrate that while apocalyptic views are always popular, despite occasional tragedies, the world keeps moving in one direction, forward making progress.

The 9/11 Attacks

Four hijacked planes:
- American Airlines Flight 11: Crashed into the North Tower of the World Trade Center in New York City at 8:46 AM.
- United Airlines Flight 175: Crashed into the South Tower of the World Trade Center at 9:03 AM.
- American Airlines Flight 77: Crashed into the Pentagon (the headquarters of the U.S. Department of Defense) at 9:37 AM.
- United Airlines Flight 93: Was heading toward Washington, D.C., but passengers fought the hijackers, causing the plane to crash into a field in Shanksville, Pennsylvania at 10:03 AM.

Casualties

Total deaths: 2,977 victims plus the 19 hijackers.
- World Trade Center: 2,753 people were killed.
- Pentagon: 184 people were killed.
- Flight 93: 40 passengers and crew died.
First responders: 343 firefighters, 60 police officers, and 8 paramedics were killed while trying to save lives.

Immediate Impact

The Twin Towers of the World Trade Center in New York collapsed due to the impact and resulting fires.
The Pentagon suffered significant damage to its west side.
Flight 93’s passengers prevented the plane from reaching its intended target, speculated to be either the White House or the U.S. Capitol.

Who Was Responsible?

The attacks were orchestrated by al-Qaeda, a militant Islamic extremist group led by Osama bin Laden.
19 hijackers, most from Saudi Arabia, carried out the attacks.

U.S. Response

War on Terror:
- Following the attacks, the U.S. launched the War on Terror, which led to the U.S. invasion of Afghanistan on October 7, 2001, to dismantle al-Qaeda and remove the Taliban from power for harboring terrorists.
- This also set the stage for the U.S. invasion of Iraq in 2003 under the belief that Saddam Hussein’s regime possessed weapons of mass destruction, though no such weapons were found.
Creation of Homeland Security:
- The Department of Homeland Security (DHS) was established to coordinate national efforts to protect the U.S. from terrorism and natural disasters.
- The USA PATRIOT Act was passed, expanding surveillance and law enforcement powers to combat terrorism.
Airport Security:
- The Transportation Security Administration (TSA) was created, revolutionizing air travel security with strict measures such as enhanced screenings and restrictions on carry-on items.

Long-Term Impact

Global War on Terror:
- The 9/11 attacks marked the beginning of prolonged U.S. military engagements in the Middle East, with far-reaching political and economic consequences.
- The war in Afghanistan lasted for two decades, ending with the U.S. withdrawal in 2021.
Anti-Terrorism Laws and Practices:
- 9/11 led to widespread changes in national security, surveillance, and intelligence gathering. These included the controversial NSA surveillance programs that monitored global communication.
Economic Impact:
- The attacks caused billions of dollars in damages and led to a significant drop in global markets. The U.S. economy suffered a recession in the months following 9/11.
Islamophobia and Social Changes:
- The attacks led to increased scrutiny of Muslims and Arab-Americans in the U.S. and around the world, resulting in a rise in Islamophobia and racial profiling.

Memorials

National September 11 Memorial & Museum: Located at Ground Zero in New York, it honors the victims and first responders.
Pentagon Memorial: Dedicated to those who died in the attack on the Pentagon.
Flight 93 National Memorial: In Pennsylvania, commemorates the bravery of the passengers who thwarted the hijackers' plan.

Global Impact

The 9/11 attacks profoundly changed global geopolitics, particularly in terms of how nations deal with terrorism, security policies, and international relations, especially between the Western world and the Middle East.

Apple’s Success Since 2001

Since 2001, Apple has transformed from a niche computer maker into one of the most valuable and influential companies in the world, with a market capitalization exceeding $2.8 trillion as of 2023. This growth has been fueled by a series of groundbreaking products that redefined industries.

1. iPod (2001)

Launch Date: October 23, 2001
Impact: The iPod was a revolutionary product that changed the way people listened to music. With its sleek design and user-friendly interface, it allowed users to store and carry thousands of songs in their pocket. The iPod, paired with iTunes, became the foundation of Apple’s digital media strategy.
Significance: The iPod was Apple's first major success outside of computers, generating billions in revenue and helping Apple establish its ecosystem.

2. Mac Computers

Ongoing Innovations: The iMac line, which launched earlier in 1998, helped revitalize Apple's computer business. Over the years, Apple has continued to innovate with the MacBook, MacBook Air, and MacBook Pro, introducing features like Retina displays, all-aluminum bodies, and M1/M2 chips.
Impact: Macs became popular for professionals in creative industries, such as design, video production, and software development. In 2006, Apple transitioned from PowerPC processors to Intel, significantly boosting performance.
Apple Silicon: In 2020, Apple introduced its in-house M1 chips, marking a major technological leap and increasing performance while reducing power consumption.

3. iPhone (2007)

Launch Date: June 29, 2007
Impact: The iPhone is often regarded as one of the most iconic and revolutionary products of the 21st century. Combining a phone, internet browser, and iPod into one device, it revolutionized the smartphone industry. The App Store (launched in 2008) allowed developers to create apps for the iPhone, turning it into a platform.
Significance: The iPhone was a massive success and became the cornerstone of Apple’s ecosystem, driving the company's growth. The iPhone's sales have accounted for the majority of Apple’s revenue since its launch. As of 2023, Apple has sold over 2.2 billion iPhones globally.

4. iPad (2010)

Launch Date: April 3, 2010
Impact: The iPad created a new category of portable devices, sitting between smartphones and laptops. Its large, touch-sensitive display made it popular for entertainment, education, and business applications.
Significance: The iPad dominated the tablet market and further entrenched users in the Apple ecosystem. It has been used in education, creative industries, and increasingly for professional use.

5. Apple Watch (2015)

Launch Date: April 24, 2015
Impact: The Apple Watch is the world’s best-selling smartwatch, focusing on health, fitness, and seamless integration with the iPhone. It introduced features such as heart rate monitoring, ECG, and fall detection.
Significance: Apple Watch expanded Apple's ecosystem into wearables, and it quickly became a leader in the health and fitness tech sector.

6. Services (iCloud, Apple Music, Apple TV+, etc.)

Apple has diversified into services, including:
- iCloud (launched 2011) for cloud storage.
- Apple Music (launched 2015) for streaming music.
- Apple TV+ (launched 2019) for original video content.
- App Store, Apple Pay, and Apple Arcade further solidified its revenue streams outside hardware.
Impact: Services now account for a significant portion of Apple’s revenue, generating $80 billion annually as of 2023.

Financial Success and Market Cap Growth

In 2023, Apple’s market capitalization exceeded $2.8 trillion, making it the most valuable company in the world. Today, Apple's market capitalization is $3.35 trillion.
Revenue: Apple’s annual revenue grew from $5.4 billion in 2001 to over $383 billion in 2023.
Stock Performance: Apple's stock price has seen tremendous growth, driven by strong sales of the iPhone, services, and a loyal customer base. It achieved the remarkable milestone of becoming the first company to reach $1 trillion in market cap in 2018; later reached $2 trillion in 2020; and $3.35 trillion today.

Key Drivers of Apple’s Success

Innovative Product Design: Apple’s focus on aesthetics and user experience has consistently set it apart from competitors.
Ecosystem Integration: Apple products work seamlessly together (iPhone, Mac, iPad, Apple Watch), which drives customer loyalty and creates recurring revenue.
Brand Loyalty: Apple has built a dedicated customer base willing to pay premium prices for its products.
Services Revenue: By expanding into services like iCloud, Apple Music, and the App Store, Apple has created a robust, recurring revenue stream that supplements hardware sales.

Conclusion

Apple’s transformation since 2001 is nothing short of remarkable. Starting with a market cap of around $6 billion in 2001, Apple leveraged innovative products like the iPod, iPhone, and its expanding services ecosystem to become one of the world’s most successful companies. The introduction of new product categories, strategic leadership under Steve Jobs and later Tim Cook, and a focus on integrating hardware and services have solidified Apple’s status as a dominant force in American digital technology made in China. Yup, design in California with manufacturing in China was one of Apple's keys to success. As always in life, success may breed failure. Over reliance in China may come back to hurt Apple as the Chinese steal its technology and render Apple products to be mojoless iterations such as the iphone 16 released two days ago. Moreover, if Trump wins the elections, as it is very much possible, Apple will be in a world of hurt as tariffs (taxes on the poor and the middle class) and a new trade war with China kicks in.

Is it time to short Apple stock? You bet. We are shorting it for a few months to see what happens. We think that Apple's glory growth days are well in the past. The Chinese continue stealing Apple's intellectual property and producing iPhone-like phones at a fraction of the price for the whole deveoping world to buy. Apple has a strong lead on privacy, and on its "gated community" ecosystem. To grow, Apple would have to open the gates to the masses, which would ruin the value for the rich. It seems that Apple's only choice is to stick to the gated community model and remain competitive as the world's most affordable everyday luxury. There is plenty of money in that value proposition, but maybe not enough to justify a price to earnings ratio of 33. A P/E of 24 seems more reasonable, which would imply a huge, slow but sure, decline in value for Apple in the next 3 years.

The future has not been created yet. We'll see what we all create between now and then. Live well. Die better. Enjoy.

Creatix Blogger

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