Apple stock is currently priced around $160 per share. Take a look at the price charts across the past weeks, months and years and you will likely assume the company is raking in the cash without major encumbrances.
On the surface, Apple seems like a solid investment. After all, the tech company has a loyal and ever-growing user base. Keep digging, however, and you will find there is reason for worry.
Wall Street analysts are growing increasingly bearish on Apple. The tech giant’s iPhone shipment estimates for the upcoming quarter are down to 34 million. This is certainly an impressive figure, yet it is not acceptable for a company like Apple.
It is no secret Apple products are held to the highest of standards. After all, most Apple offerings are priced higher than similar products made by their competitors, so it makes sense for investors and consumers to have sky-high expectations. Consider the fact that Apple’s previous estimate for iPhone shipments was slightly in excess of 40 million. Wall Street analysts believe there is a good chance Apple’s stock will fall after the upcoming earnings report. Once you consider these factors, it is easy to understand why the bears are calling for a sell-off.
A potential Apple share buyback announcement provides some protection against a potential slip. Bulls are adamant such share buyback programs are within the realm of possibility for Apple. If such a program kicks in, it will decrease the aggregate outstanding shares and cause earnings per share to increase. Stocks tend to be bought and sold based on value more than anything else. If the share buyback is particularly large, the total demand for Apple stock could spike. Stock prices tend to be governed by the dynamics of supply and demand. Adding even more demand will likely send Apple’s stock price higher.
For all the arguments in favor of a potential buyback boosting Apple’s stock, the truth is buybacks are not the magic bullet to this computing stalwart’s pending woes. Do not be fooled by a temporary increase in Apple’s stock price. Only those who truly believe in Apple’s potential to produce business results should invest.
So, do not fall for the trick of a potential stock buyback program. Those who are familiar with Wall Street dynamics understand share buyback programs are often used to mask fundamental business flaws.
Those who own Apple stock might hesitate to take some profits off the table simply because the company’s Services business is thriving. Take a look at Apple’s financial statements across previous years, and you will find the company’s Services business is its bright spot. This growing stream of revenue comes from Apple’s insanely popular App Store, Apple Music, iCloud and AppleCare warranties. Apple’s Services business has grown more than 20 percent in each of the past couple years. Though the program’s growth is certainly a positive sign, it is overshadowed by the tech company’s struggling iPhone line.
The new iPhones cost around $1,000. This is an egregious sum of money when compared to rival smartphones that can be had for a few hundred dollars. Do not be deceived by the fact that Apple’s iPhone business eclipsed the $140 billion revenue mark this past year. The tech giant’s iPhone revenue has decreased by about 5 percent per year. This means the company’s smartphone revenue will drop by about $7 billion in 2018 alone. The increase in Services revenue cannot make up for slow iPhone sales. Even if Apple’s Services offerings pick up the slack, it does not change the fact that Apple is losing the smartphone war.
Apple’s iPhone is undoubtedly one of the more amazing technological accomplishments in human history. If you are infatuated with your iPhone, do not let its appeal sway your investment decision. Those who own Apple should considering selling some of their shares as pessimism surrounding the company grows with each passing day.
The analysts are down on Apple for good reason: consumers are smartening up to Apple’s overpriced products and voting with their dollars. Maintain part of your position, take some profits off the table, and hold tight to see if Apple can surpass analyst estimates.
Regards,
Ethan Warrick
Editor
Wealth Authority
