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APPLE Underperform Rating

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August 25, 2011 – Comments (2) | RELATED TICKERS: AAPL

I just down thumbed APPLE, but not because Steve Jobs is leaving.  Apple is facing some very tough competition in the smart phone industry, slowing Mac sales and the death of iPod devices (maybe five years left).

The one bright spot for Apple is the iPad, which has little serious competition.  The iPad will not be enough to justify a $365 billion market cap with a P/E of 15 and no dividend.  That last fact can really screw up this pick, because if Apple decides to throw out a 2% dividend the risk/growth calculation will change dramatically.

The last issue, which analysts completely ignore when discussing Apple, is the slowing economy.  The young twenty/thirty year old crowd gobbling up their products like evangelical Christians gobble up preachers talking about the rapture, are going to run into a headwind of jobs that will support their latest gadget craze.

Let me clarify, APPLE is not going away and they will continue to be a force in the market for many years to come.  I'm merely down thumbing them because they are over priced for future market conditions and a stagnant economy.  I expect Apple will underperform the market by at least 10% over the next two years.

2 Comments – Post Your Own

#1) On August 25, 2011 at 11:44 AM, Turfscape (39.84) wrote:

Year over year Mac sales growth

Q1: 23%

Q2: 28%

Q3: 14%

During this timeframe the overall year/year growth for PC sales was something like 4%.  I'd consider that a funny definition of slowing Mac sales...

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#2) On August 25, 2011 at 1:55 PM, FleaBagger (28.85) wrote:

I was too early on this call. I hope your timing is better.

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