3 Reasons Why You Should Be Negative On Apple

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Shares of Apple Inc. AAPL have had a strong rally in the past one month fuelled by the strong numbers that the company reported in its quarterly earnings. Although most analysts are positive on the stock, Colin Gillis of BGC Partners feels that the company is approaching the top from where the declines may begin.

 

Gillis was recently on CNBC to discuss why it might be time to go negative on Apple.

 

 “Apple’s valuation now is clearly an outlier,” Gillis said. “Now, it’s a tremendous company and they are a profit machine. They are capturing all the profits in one of the most lucrative markets out there, which is the smartphone market, but there are some dynamics in this market that bear paying attention to, which is that-”

 

Slowing Growth

 

“A) it’s slowing down, the growth of the overall market is slowing down from this 20 or 30 percent, its going to approach the growth of the overall phone market, which is closer to 5 to 10 percent.”

 

Lengthening Of Upgrade Cycle

 

“B) The upgrade cycle for phones is likely to lengthen [right] as features just become good enough, we see it in PCs which have an upgrade cycle of 4 to 5 years, TVs are 10, phones are only 2 so if that upgrade cycle happens and lengthens, it’s going to be a negative for Apple.”

 

Carriers Reducing Subsidies

 

“And then three, if carriers are less able and willing to subsidize phones, that’s also going to be a negative for Apple.”

 

When countered that all the arguments he made are well into the future and are less likely to have an impact in the short-term, Collin replied, “No, there’s very little that’ll kind of pull this thing down in the near-term except for perhaps the dividend disappointing investors right?, maybe the smartphone [perhaps meant the Apple Watch] comes in a little slower than people are expecting, but if we are not at the top, maybe close to the top.”

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Posted In: CNBCMedia
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