Will Exploding Note 7 Save Apple?

I have been bearish on Apple (AAPL) because of the soaring sales of Samsung’s Galaxy S7. Since Samsung’s Galaxy S7 sales have jumped year over year in a stagnant smartphone market, I have been saying it for months that the iPhone 7 will be a worse performer than its predecessor.

However, it was recently reported that Samsung’s new Note 7 are catching fire/exploding worldwide. This, coupled with the fact that carriers like Sprint and T-Mobile are reporting significant increases in iPhone pre-orders, have given Apple longs some hope.
However, I still think the stock is not a good buy at these levels.

Given that many iPhone users were using older iPhones, the high number of pre-orders is possibly a result of many Apple loyalists upgrading their phones after a few years. However, people upgrading their iPhones won’t be enough to drive Apple’s earnings higher. Apple probably needs to increase its market share in order to move any higher. And, as I have already mentioned several times, I don’t see it happening due to strong sales of the Galaxy S7. Yes the exploding Note 7 may put many people off, but Samsung is still likely to enjoy a healthier growth rate than Apple.

However, if Apple manages to grow its iPhone sales on a year over year basis, it will be a commendable achievement given the performance of its rivals.
Will Exploding Note 7 Save Apple?
Image by kropekk_pl / Pixabay
That being said, I still don’t expect it to happen primarily because of the absence of any innovative feature.

Yes, the company did upgrade the battery, camera and improved the design, but the absence of the "Wow" factor that Apple is traditionally known for is the reason why I am bearish on the stock. In addition, the market is currently near all-time highs and given the uncertainties surrounding the next rate hike, I think the risk/reward ratio is not favorable for Apple longs at current levels.


Despite the recent rally, Apple is definitely trading at cheap levels. However, I don’t expect Apple to move much higher. In my opinion, there isn’t a large margin of safety for investors at these levels. Hence, I think Apple is a sell. Investors looking to buy the stock or add to their positions should probably wait for a significant pullback before pulling the trigger. I still believe Apple will struggle to report growth this year, which in turn is why I am bearish on the stock for the time being.
Published on Sep 15, 2016
By Ayush Singh

Copyrighted 2016. Content published with author's permission.

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