Wall Street Is Rightfully Bearish on Apple Inc. (AAPL) Stock

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Apple Inc. (NASDAQ:AAPL) has been dragging down the Dow this week in the wake of an ugly earnings miss. In case you missed it, Apple reported earnings on Tuesday. Add up the stock’s movement over the last five days, and shares have slid around 6%, making this the fifth straight quarter AAPL has dipped after earnings.

Sales fell short of Wall Street’s expectations, causing continued speculation that the iPhone 7 isn’t driving the upgrade volume needed for Apple stock to keep chugging higher. While the company touted its growth in services revenue in the release, revenue for the company’s three main products declined, leading to an overall revenue drop and miss.

More specifically, sales tallied $46.9 billion vs. $51.5 billion a year ago, and vs. Wall Street’s expectations of $47 billion. This represents the second straight quarter that iPhone sales and overall sales have dropped.

Earnings barely topped expectations, tallying $1.67 per share vs. the consensus of $1.66, but no one seemed to notice the beat — perhaps because that figure too represented a big-time year-over-year drop. During the same quarter of 2015, earnings tallied $1.96 per share, which translates to a decline of nearly 15%.

AAPL Stock Has the Blues

Wall Street is being noticeably harsh on Apple stock, but if you ask me, it’s for good reason.

I’ve been expressing concern about Apple stock for some time, noting that the upgrade cycle was slowing as the company’s margins were thinning. That’s hardly the foundation I’d prefer for an investment. Apple stock is an age-old darling facing a slowdown, and investors are reluctant to let go of a name that’s performed so well and disrupted so much.

In the recent past, Apple stock has been called a bargain, with many pointing to its growing dividend. But as MarketWatch pointed out during its live blog, Apple has relied heavily on debt to finance this dividend; its long-term debt load now represents almost one third of its cash reserves.

And the transition from growth stock to value stock is slow and never pretty. If you believe that’s where Apple is right, you better buckle up.

Meanwhile, the fact that Apple expects to return to revenue growth this quarter is only a highlight because the year has been so rough. And that growth is hardly impressive; the lower end of the range is barely above last year’s number ($75.9 billion a year ago vs. the low end’s $76 billion).

Once again, Apple was also patting itself on the back for its services revenue, which posted a 25% year-over-year increase. But it’s always easier to grow smaller slices of the pie. And while this segment has potential, Apple stock has high expectations because of its name and history. Wall Street holds it to a very high bar because it was a tech darling for so long.

Services revenue is a drop in the bucket that quite frankly can’t offset slowing growth in Apple’s core areas.

Investors should be looking for companies posting strong, consistent growth. Apple just isn’t that company right now. While some may try to justify it by looking at value and bargains, I agree with the bearish sentiment surrounding Apple stock at the moment.

Hilary Kramer is the editor of GameChangersBreakout Stocks Under $10High Octane Trader,Absolute Capital Return and Value Authority. She is an accomplished investment specialist and market strategist with more than 25 years of experience in portfolio management, equity research, trading, and risk management. She has extensive expertise in global financial management, asset allocation, investment banking and private equity ventures, and is regularly sought after to provide her analysis on Bloomberg, CNBC, Fox Business Network and other media.

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