Market Overview

Apple Has Been 'Over-Earning' For A Long Time

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Apple Has Been 'Over-Earning' For A Long Time
  • Shares of Apple Inc. (NASDAQ: AAPL) are up nearly 4 percent year-to-date but down almost 7 percent from six months ago.
  • Wedbush Securities Director of Equity Trading Ian Winer argued that Apple has been "over-earning" for a long time.

Ian Winer was recently a guest on #PreMarket Prep, a daily trading idea radio show hosted by Joel Elconin and Dennis Dick.

Ian Winer questioned if Apple will continue to innovate the market which will in turn drive revenue higher.

Commenting on the new iPhone, Winer noted two important facts investors need to keep in mind: 1) the device itself hasn't changed appearance (although there may be some component upgrades), and still looks like previous generation iPhones, and 2) for the first time ever, Apple will be selling the new device to China "right out of the gate."

Winer said as a result of earlier than usual sales to China, the iPhone revenue and sales data are expected to look a "little better." Moreover, comparing this year's sales figures to previous years won't yield an accurate comparison as it won't be "comparing apples to apples."

"At the end of the day, what is Apple's story?" Winer questioned. "Is it a buyback and cash return story? A financial engineering story? Or is it an innovation story. If it isn't an innovation story, then you won't get any multiple expansion."

Winer suggested that Apple has been "over earning" for a while and this culminated in the previous quarter's results which showed peak earnings growth, peak revenue growth, peak margin growth at a time when the competition is increasing worldwide, especially in China.

"At a $700 billion market cap, there has to be something really special to get new money in the door," Winer concluded.

Bottom line, Winer doesn't think that Apple's latest product releases are sufficiently innovative to drive the stock higher. Accordingly, he suggested that investors sell the stock near the $120 level.

Latest Ratings for AAPL

DateFirmActionFromTo
Oct 2020Piper SandlerMaintainsOverweight
Oct 2020Credit SuisseMaintainsNeutral
Oct 2020Morgan StanleyMaintainsOverweight

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