I have written several bearish articles on Apple stock since the price peak of $705 last year September. In fact, six days after that top on Sept. 21, I wrote that it was probably the top. I predicted the next downside target of $520.
When that was reached, I wrote that it would go to $420, purely based on chart analysis. And when it bounced to about $440, I said on major international TV that I wouldn’t touch the stock unless it had “a 3 in front of the price.” That also happened when the price was $385.
So much for the track record and credibility.
On July 23 the company released its quarterly results. The stock gained about $25 in after-hour trading.
Question: does this change my bearish view of the stock? Always remember, I am writing about the stock, not the products or the company.
The reasons to buy any stock:
- Rising sales
- Rising profits
- Rising profit margins
Did the latest results for Apple show that? Let’s look:
iPhone sales had a quarterly gain of 20% year-over-year (YoY). That’s the best part. It goes downhill from here.
Macintosh sales were down 6.6% YoY. iPad: sales plunged 27.4% YoY. iPod sales plunged 30.8% YoY. Total sales were barely up from one year ago.
Apple’s profit margin declined. Now the firm’s profit margin is 37% versus more than 47% a little more than one year ago.
The company has not reported a quarterly gross margin below the 36% mark since the March quarter of 2009. I predict that will occur within the next 6 months. Apple products are too expensive. That’s OK when you have a monopoly, but not when the competition is jumping over you. Apple needs lower priced products.
In the first quarter last year Apple’s sales growth rate was a staggering 60%. By this year’s first quarter, Apple’s sales growth had decelerated to 11%. Now it is 0.9%, barely ahead of one year ago.
Bottom line: Based on the above numbers, the only reason for buying a stock with such results is “blind hope.” And hope is the worst reason for buying any investment.
Bert Dohmen, Founder
Dohmen Capital Research, Inc.