Is There More Trouble in Store for Apple?

After being bullish on Apple (AAPL) for a long time, I recently turned bearish on the stock and recommended investors to sell when the stock was trading close to $120. Although I still think Apple is a great company and may appear undervalued, I think investors should wait for a better entry point and should still stay away from the stock.

iPhone sales will slow down

The Market is obsessed with year over year growth and the primary reason why Apple has struggled over the last few months is the company’s decline sales.
Although generating over $70 billion in revenue is staggering, investors are worried about Apple’s future growth and sales of the iPhone 6S.

In the latest reported quarter, Apple reported a huge drop in Mac and iPad sales, whereas iPhone sales also fell year over year for the first time in the company’s history. Given the market’s obsession with growth, shares of Apple slid following the earnings announcement. Moreover, Apple’s guidance was expectedly weak. Even if Apple manages to meet the midpoint of the revenue estimates for the upcoming quarter, its sales will drop by over 10%.

A 10% year over year decline is a sin in present market conditions, and things may get even worse for the Cupertino Giant. According to several estimates, sales of the iPhone 6S have slowed down considerably and may come in way below the sales of its predecessors. Since Apple generates roughly 60% of its revenue from the iPhone, a drop in iPhone sales will have a huge negative impact on the company’s gross margin.

Needless to say, the company’s profits will take a hit as well. Hence, I expect Apple to remain weak, or fall further in the upcoming days, due to the falling sales of the iPhone 6S. According to me, the ideal time to invest in Apple would be just before the launch of the next installment of the iPhone.

Conclusion

With Apple’s sales falling at a very fast rate, investors can expect the stock to drop to around $90 in the coming six months. The weakness in iPhone sales will create a great opportunity for long-term investors. For this reason, I think investors should not buy Apple at this point in time and should wait till the company launches the next generation of the iPhone. So, I would advise investors against buying Apple at current levels despite how cheap the stock appears.
Published on Feb 23, 2016
By Ayush Singh

Copyrighted 2016. Content published with author's permission.

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