Why Buying Apple is a Mistake... For NowAAPL), I was a perma bull throughout 2014 and for a large portion of 2015 as well. However, in the last quarter of 2015, I recommended investors to sell the stock and the stock has plunged almost 15% since then. Make no mistake, I still like Apple and I do think the stock is undervalued. However, I believe Apple investors are very difficult to please and the stock has become a victim of its own success. For this reason, I think investors who sold the stock following my recommendation should not buy it yet as I think the stock will continue falling.
Market’s obsession with year-over-year comparisons
As I have said above, Apple investors are very difficult to satisfy. The stock has failed to rise despite Apple reporting great earnings and revenue growth. Also, the market is obsessed with y/y comparisons, which is the primary reason why I think investors should stay away from the stock for the time being.
iPhone 6 was a blockbuster product and I knew there was no way that the iPhone 6S would be Apple to surpass its predecessor’s success. Given that iPhone sales have grown y/y since its launch, a decline in the metric will result in an irrational reaction from the market. While the decline was unavoidable, Apple has managed to dodge it till now. However, I think this year will be the first year that marks a y/y decline in iPhone sales.
There was a pent up demand for a larger screened iPhone, which is why the iPhone 6 was such a huge hit. However, the iPhone 6S didn’t have such a favorable sales driver, and the lack of any significant new features has made it impossible for it to surpass the sales of the iPhone 6.
My doubt was confirmed when many Apple suppliers like Qorvo (QRVO), Cirrus Logic (CRUS) etc., analysts, and reports pointed toward the fact that Apple has cut back on production. With so many factors pointing toward a decline in iPhone shipments, I think Apple’s earnings will not satisfy the market and the stock will eventually head lower.
This can be frustrating for Apple investors, however I think they should can use the dip to add to their positions as I still believe in the long-term prospects of the company. However, as of now, I think investors should avoid Apple and should only consider the stock after the earnings report.
Published on Jan 12, 2016By Ayush Singh