AAPL: 3 More Reasons to Bet Against Apple Stock

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Back in early July, I warned that the clock was ticking on the bullish love fest surrounding Apple (AAPL) heading into its quarterly earnings report.

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The reasons were clear: Apple’s stock chart looked weak, the Apple Watch was lame, Tim Cook just doesn’t have the magic, smartphones are played out and earnings looked shaky. A melt-up into the earnings release ensued because hope dies hard.

But then reality hit.

Shares have plunged below their 200-day moving average for the first time since 2013 and are down nearly 14% from their high. As you surely know, AAPL’s quarterly results were a disappointment on a miss in iPhone sales and China results. Well, the selloff in Apple stock was deepening on Tuesday.

While Edge Pro subscribers nabbed a 212% put option gain on Apple stock between June and July, the evidence is building that another sustained downturn for the market’s one-time tech sweetheart is upon us.

Here are three reasons why:

China

The big catalyst for Tuesday’s decline in Apple stock was a report by analysts at Canalys that AAPL has lost its lead in the Chinese smartphone market. Xiaomi regained its sales leadership crown with a 15.9% market share. Huawei is in second place at 15.7% share. Apple fell to third place.

China was supposed to be the great growth market for Apple, but a combination of slowing domestic demand (GDP growth slowing and Chinese stocks on the fritz) and stronger competition is unraveling that thesis.

Strategic Listlessness

It’s becoming really clear, really fast, that CEO Tim Cook just doesn’t have the visionary talent of Steve Jobs. Not even close. The Apple Watch, his first major product debut, has been a flop hampered by battery life, inadequate processing power, and most importantly a lack of clear demonstrated need vs. pulling your phone out of your pocket.

His other big plays, Apple Music and the iPad Mini, are in direct violation of Jobs’ stated opinion of tablet form factor size and owning vs. buying music.

Recent headlines about a potential electric vehicle tie up with BMW or launching a mobile virtual network seem like distractions while competitors are eating into its core categories.

Market Oversaturation

Much has been made of slowing smartphone sales. With the lift from the large-screen iPhone 6 behind us, it’s hard to see AAPL moving the needle on the iPhone 6s refresh with incremental improvements such as haptic feedback and Force TGouch technology.

A similar dynamic is playing out in tablets: IDC reports Q2 worldwide shipments of tablets declined 7% year-over-year. The decline is set to deepen, with Digitimes Research predicting a 15% decline in the third quarter. Meanwhile, iPad shipments are expected to fall 20% from last year.

Anthony Mirhaydari is founder of the Edge and Edge Pro investment advisory newsletters. Free two- and four-week trial offers have been extended to InvestorPlace readers.

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Article printed from InvestorPlace Media, https://investorplace.com/2015/08/aapl-3-more-reasons-to-bet-against-apple-stock/.

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