Is Apple Stock Being Demoted From Its Role As Market General?

Zinger Key Points
  • Cerity Partners' Jim Lebenthal trimmed his Apple position last week on valuation concerns.
  • "That's not where the leadership is going to come from," Lebenthal says.
Is Apple Stock Being Demoted From Its Role As Market General?

A longtime Apple Inc AAPL bull has pared back his exposure to the Cupertino-based company as he expects the tech stock's reign as the market leader to come to a close. 

What Happened: Cerity Partners' Jim Lebenthal trimmed his Apple position last week as mega-caps faced significant selling pressure.

"It's really just this simple: Apple is a great company, but its multiple is not going to expand going forward," Lebenthal said Wednesday on CNBC's "Fast Money Halftime Report."

Apple is currently trading around 23 times forward earnings, according to data from Benzinga Pro. In its most recent quarter, Apple reported earnings of $1.20 per share, which beat estimates, but was down from $1.30 per share year-over-year. 

"It just doesn't have the earnings per share growth that would merit a higher multiple," Lebenthal said. 

He told CNBC that he expects Apple's earnings growth to be in the high-single digits over the next few years. 

"Why? Because it's actually kind of a mature company. It's not like they are going to come out with the next unheralded, unheard of product like the iPhone was 10 years ago," he said.

With earnings growth expected to slow, Lebenthal noted that he doesn't expect Apple to continue to be a market leader. He's still holding onto Apple shares, but he's now meaningfully underweight relative to the overall market, he said. 

"That's not where the leadership is going to come from. That's why I trimmed it," Lebenthal said.

Related Link: EXCLUSIVE: Top 10 Stocks Searched On Benzinga Pro In September: Where Do Tesla, Apple, Bed Bath & Beyond Rank?

It's also worth noting that "Shark Tank" investor and O'Shares ETFs chairman Kevin O'Leary turned less positive on Apple stock in recent weeks.

He told CNBC that this is the first time he has ever refrained from increasing his position back to a 5% weighting on a pullback. With the stock trading around 23 times earnings, he thinks there's more room to the downside.

O'Leary noted that Apple stock will likely need to trade down to around 18 times earnings before it finds a bottom.

AAPL Price Action: Apple has a 52-week high of $182.94 and a 52-week low of $129.04.

The stock was up 0.55% at $146.91 Wednesday afternoon. 

Photo: courtesy of Apple.

Posted In: CNBCJim LebenthalKevin O'LearyShort IdeasTrading Ideas