Stock (Symbol)

Apple (AAPL)

Stock Price

$96

Sector

Technology

Data is as of

February 2, 2016

Expected to Report

Apr 25 – Apr 29

Company Description

Apple Inc. (Apple) designs, manufactures and markets mobile communication and media devices, personal computers, and portable digital music players, and sells a variety of related software, services, peripherals, networking solutions, and third-party digital content and applications. The Company’s products and services include iPhone, iPad, Mac, iPod, Apple TV, a portfolio of consumer and professional software applications, the iOS and OS X operating systems, iCloud, and a variety of accessory, service and support offerings. The Company also sells and delivers digital content and applications through the iTunes Store, App StoreSM, iBookstoreSM, and Mac App Store. It sells its products worldwide through its retail stores, online stores, and direct sales force, as well as through third-party cellular network carriers, wholesalers, retailers, and value-added re-sellers. Source: Thomson Financial

Sharek’s Take

Apple’s (AAPL) profit growth slowed from 38% 2QtrsAgo to 7% last qtr as the stock broke below $100. IPhone sales — 63% of total company sales — were 74.8 mln vs 74.5 mln last year, missing the 76.2 mln est. Sure the company is selling tons of apps, but iPhone sales are such a big part of the pie that flat sales growth makes it hard to move the needle higher. The company gets only around 1/3rd of sales from the US, and the strong dollar is killing all these US multinationals. After it reported profits AAPL had 2016 profit estimates cut from $9.85 to $9.13 — which would be below last year’s $9.22. Negative growth. This isn’t a good scene. The next catalyst could be an Apple car, but the company has thousands of engineers (some of Teslas fired engineers) working on it and I don’t think they are making progress. I recently sold AAPL when it broke down through $100, likening it to Dell and Nokia (but not as bad as that). At 11x earnings the stock is what it is (plus a 2% dividend). Lots of mutual funds and hedge funds already own Apple, and my guess is there will likely be more sellers than buyers from here.

One Year Chart

Profit growth — and the stock price — really fell off the cliff last qtr. Profits grew 7% as sales increased 2%. I didn’t even go into how much was lost due to the strong dollar, cuz that’s not going away anytime soon. Look at the negative profit estimates. Next qtr’s profit estimate tanked from +6% to -14%.

Fair Value

Pundits say AAPL is cheap, with price targets of one-hundred-whatever. But look, the stock had a median P/E of 12 or 13 three of the last four years. So now since the P/E is 11 that’s cheap? Not when profit growth is expected to be (1) down year-over-year and (3) falling. What if the company makes $8 next year?

Bottom Line

Apple is an amazing, one of the most technologically advanced companies in the world. I feel they will come up with another catalyst, but not anytime soon. Pundit’s feel the stock is worth more than $100, but there’s the issue of flat iPhone sales and a strong dollar pulling down profits. They says it’s cheap at 11x earnings but there’s stocks out here selling for 7x earnings. Apple could soon be one of them.