One thing Apple Inc. (NASDAQ:AAPL) bulls fail to appreciate is just how big it has become, and thus how difficult it is for the stock to move. Since I discussed AAPL stock in February, it has advanced about $5 to its current level of $140 per share. This small gain has created $26 billion of market cap, because Apple has 5.25 billion shares outstanding.
Apple’s valuation of $730 billion is almost $100 billion greater than last year’s GDP for Saudi Arabia. Its market cap gain since Jan. 1 — $124 billion — is more than the total market cap of MasterCard Inc (NYSE:MA). Apple is now worth more than Exxon Mobil Corporation (NYSE:XOM) and JPMorgan Chase & Co. (NYSE:JPM) combined.
Yet analysts are still pounding the table for Apple, urging you to get into Apple stock. That’s even though a price of $200 per share, predicted by our Will Ashworth, will take its market cap well over $1 trillion — an almost unimaginable figure.
AAPL stock has a difficult path to any significant gains now. That’s why I just sold some of my position.
Why You Should Be Twitchy
Apple’s size has made some InvestorPlace writers antsy about the stock.
Ryan Fuhrmann says AAPL stock “is going to frustrate you” and worries that so much of its $78 billion in sales last quarter still came from hardware.
The stock has been bid up in anticipation of the iPhone 8 launch, which means investors may have a painful wait for gains. Hillary Kramer notes that even a reboot of the iPad won’t move the needle much on Apple sales, so big has the iPhone become.
Apple’s size makes any move it might make to break out of its iPhone dependence, say by going into the movie business, look small.
Viacom, Inc. (NASDAQ:VIAB) and its Paramount movie studio, plus its cable networks, would cost mere seat cushion money at a market cap of $17 billion. If Apple CEO Tim Cook decides he doesn’t like what’s on Fox News, he can buy Twenty-First Century Fox Inc (NASDAQ:FOXA) for cash, right now, and the $56 billion market cap would barely make a dent in Apple’s $250 billion cash hoard. It would also be less than one year of operating cash flow.
Apple’s giant “spaceship” campus, onto which 12,000 employees are moving, starting next month, may only seem outsize in comparison.
Oceans Rise, Empires Fall
With Apple selling for just 16 times earnings — that’s less than the general market — Apple bears can still find reasons to be worried.
For instance, former Vice President Al Gore — an Apple director — recently sold $37 million worth of shares.
Meanwhile, even bullish AAPL analysts imagine a price of $150 per share for the stock, which would be just a 10% gain from where it is now.
Apple shares have been gaining despite 2016 sales of $215 billion being almost 10% less than its record 2015 haul of $233 billion, despite its profit margin and operating margin falling slowly for years, and despite its debt level now representing 25% of assets. Android, the mobile operating system from Alphabet Inc (NASDAQ:GOOGL), now represents 88% of the global market.
The bullish case is that Apple continues to gain share in the U.S. and that Android’s lead means there is ample room for it to grow. The bulls will also point out that Apple knows how to make big money from its phones, with its revenue from Services along now running at a $30 billion annual rate, making it a major cloud player by default.
The Bottom Line on AAPL Stock
I recently took the opportunity to sell some of my Apple shares, at about its current price.
It remains one of the most profitable investments I have ever made, but I have become bearish on the economy, and Apple can’t get out of the way of a recession, even a small one.
Diversification alone should make you wary of AAPL stock. Even with my latest sale, Apple is the second-largest holding in my stock portfolio. It’s is a mature company, and mature companies won’t grow the way maturing ones will.
Remember that when you next visit the Steve Jobs Theater. If Steve were alive, he would still be younger than me.
Dana Blankenhorn is a financial and technology journalist. He is the author of the sci-fi novella Into the Cloud, available at the Amazon Kindle store. Write him at firstname.lastname@example.org or follow him on Twitter at @danablankenhorn. As of this writing, he was long AAPL and GOOGL.