Traders, investors, and pundits alike have bemoaned the lackluster performance of Apple shares since July, when it double topped at $132.50 a share.
In little more than a month, it gave back a heart rending 31% at the August 24 flash crash low, wiping out a breathtaking $232 billion in market capitalization.
The bad news is that conditions at Steve Jobs? creation are about to get a lot worse. At the very least, the $92 handle cries out for a revisit on the next bad day, or earnings disappointment.
Let me give you a list of seven worries if you happen to be an unfortunate Apple shareholder.
1) The iPhone 6s doesn?t have the juice to produce new highs in year on year sales. There are just not a lot of ?wow factor? new features to justify an upgrade for most iPhone 6 owners, including me.
iPhones account for 75% of the profits of the company, and 100% of the growth. All the rest, Apple TV, Macs, laptops, iPads, iPods, and even cars are just so much hot air.
2) Wage inflation in China is rampant, running at a 20% annual rate for skilled workers. That?s why workers in China change jobs every February, to capture a pay hike. Higher manufacturing costs will squeeze Apple?s profit margins.
Watch out for more suicides at Foxcon, the Chinese company that makes the phones.
3) The ?ATM effect? is hitting Apple?s share price big time. That is when investors sell winners to raise cash levels. Apple stock was, at one point, up 91% from where I sent out a Trade Alert to buy it at $385 two years ago.
4) Expect President Hillary to make taxation of foreign profits earned by US multinationals a top priority. Guess who has the biggest overseas stash? Apple, which keeps a major portion of its $200 billion cash horde parked in offshore bank accounts. Pass the suntan lotion!
5) I know this one is an oldie, but it is still a goodie. Everyone in the whole world already owns this stock, either directly, or indirectly through pension funds, ETF?s, NASDAQ index baskets (QQQ), or technology funds. If everyone is already fully committed, where does the marginal new buyer come from.
6) So is the law of large numbers. With a market capitalization at a staggering $630 billion, to eke a mere 10% gain in the stocks requires roughly $63 billion worth of new investment, and possibly more. That is more than the entire stock market sees on a good day.
7) With interest rates rising sooner or later, support from the company?s 1.88% dividend yield will become less helpful.
Mind you, I have not suddenly become an Apple hater. But there are legions of those out there, mostly outside of California. There always have been.
However, I don?t think the next run to a new all time high will begin until next year. That?s when the stock will start discounting the new iPhone 7. That product will have all the new features and gizmos, with different screen sizes and colors. (Rose gold? Really?).
People will pay through the nose to get that, and yes, including me. That?s if my current iPhone 6 doesn?t get stolen first and end up in on the black market China, get hijacked by one of my kids, or dropped in a toilet by my daughter.
This should provide enough rocket fuel for Apple shares to make it to $150, or higher.
You heard it here first.
