Because of its mega-sized market capitalization, where Apple (AAPL) goes, so goes the overall stock market. And this week, despite the over-the-weekend launch of the iPhone 6s and 6s Plus, shares have been moving lower.
Apple stock broke below a two-month uptrend support on Tuesday and has settled near levels last seen at the beginning of September.
It wasn’t supposed to be this way: The iPhone 6s is, on the surface, selling well and has gained positive reviews. But it benefited the Oct $113 AAPL puts recommended to Edge Pro subscribers on Sept. 24, which are carrying a 50%-plus gain.
The price action in Apple stock reveals underlying problems with this long-time big-tech sweetheart. Here are a few of the emerging flaws:
The Worms in Apple Stock
Boring Reveals: For one, the Sept. 9 product announcement rang hollow for many. Since the death of Steve Jobs the innovation cycle has slowed. It’s all about variation of what already exists: New sizes, new colors, and other incremental changes. The much-hyped Apple Watch and Apple Music launches have ended in embarrassment.
The new Apple TV seems like a cheap knock-off of the already cheap Nintendo Wii, which was cool and innovative like nearly 10 years ago. All the Macbooks look the same. Same with the iMacs. The iPad Pro is an obvious and not-that-unique rip on Microsoft’s Surface with an “Apple Pencil” stylus. Apple even brought Microsoft (MSFT) out on stage to demo its Office apps. How corporate and boring!
Even the keynote address itself was weird and awkward; a bunch of guys in dad jeans doing a weak impersonation of Jobs circa 2007 with none of the magic or gravitas.
So, iCar or Not? All the hints, rumors and innuendos about a semi-autonomous Apple electric car seem one step removed from a pipe dream. Apple has zero experience in an area of incredible technical and regulatory difficulty. And they are way, way behind existing automakers as well as newcomers like Tesla Motors (TSLA) in intellectual property and patent filings. A cross-licensing or joint-venture deal looks like a necessity, further pulling down the profit margins of any vehicle project.
Selling smartphones is a much more lucrative business than the ultra-competitive and high-overhead car business. AAPL enjoys a 30.2% operating profit margin. Ford (F) hovers around a 3% operating margin. TSLA is losing money, with a -10% operating margin.
We Care Less: Demand for the company’s products is falling off. This was highlighted by the drop in Apple stock following the reporting of Q2 results in July when investors pooh-poohed weak results out of China. Chinese sales were the focus of the bizarre and still-not-explained “email” from Apple CEO Tim Cook to CNBC stock jockey Jim Cramer in the midst of the Aug. 24 “Black Monday” stock market selloff allegedly talking up demand out of China.
The iPhone is losing market share there. And earlier this week, a DigiTimes article cited a major integrated circuit supplier as indicating AAPL “slightly lowered” its demand for iPhone 6s supplies for the month of December — indicating a coming production slowdown. Suppliers say shipments could fall to 65 million to 70 million units in the fourth quarter from 75 million to 80 million units in the third quarter.
Apple also included China in its opening weekend sales numbers for the first time, skewing the results.
We will know more about the future direction of Apple stock when the company releases results after the close on Oct. 27. I expect more disappointment.
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