Apple is the darling of many investors. The expectation is that the company can do no wrong. Such unrealistic expectations are always shattered. It’s just a matter of time.

Hedge Funds loved Apple. Carl Icahn bought over 53 million shares, and the Apple ‘groupies’ on the internet insult everyone who pointed out the future negatives with four letter words instead of facts.

I have written about all the negatives for Apple for over a year. Declining profits and profit margins, no innovation unless you consider a larger phone “innovation,” an Apple Watch that is selling so poorly that the company won’t give sales numbers, Apple Pay, which has huge competition, and the company’s huge employee overhead.

The iPad is basically the same as the version 1 and 2. Users would love to see new features, like a UBS port, but Apple is tone deaf. Sales in the 4th Apple quarter were down 19.4%.

Now they talk about an Apple car. That would be absurd and a big money loser.

The much expected Apple TV stayed a small box similar to Roku while fans were expecting a real TV.

Then Apple buys a maker of mediocre headphones for $3 billion. Any Asian manufacturer could have delivered those headphones at a fraction of the cost.

Let’s face it: Apple is still relying on the one product that the genius Steve Jobs came up with when he revolutionized mobile devices. As I wrote one year ago, Apple is a ‘one trick pony.’ And that pony has matured to an old mare.

It’s the typical evolution of every very successful firm when the success makes it complacent. Lower priced competing products will now eat Apple’s most profitable product.

Other analysts finally have the courage to come out with the negatives. The major negative is that iPhone sales will decline in 2016. Wow! That will cause a rude awakening. One year ago I wrote that iPhone sales would decline in Q4 of this year vs. the prior year. It could still happen, but will certainly happen in 2016. The economic winds are blowing hard against all companies that depend on the consumer.

Stock buybacks have supported Apple stock. A huge $140 billion have been authorized. But that’s just financial engineering. Eventually, when the losses on the shares bought back get too big, they will stop. And then there is no support.

Don’t take my word for the above. Here is what Bloomberg.com wrote on Dec. 14, 2015:

  • Morgan Stanley lowered its forecast for iPhone unit sales and now estimates a drop of 6 percent in fiscal 2016. China is the only market with year-over-year iPhone demand growth in the December quarter, according to the report.
  • JPMorgan Chase & Co. published a report the same day saying “November sales signal signs of early weakness of iPhone 6S cycle.” 
  • Drexel Hamilton analysts said in a Dec. 8 note that 97 percent of the companies included in a basket of Apple suppliers in Taiwan had reported sales that gave a weaker performance, suggesting that November revenue fell by 6 percent from the previous month… 
  • Credit Suisse reported in a Dec. 1 note that Apple lowered its component orders in November, suggesting weak demand for the new iPhone 6s. 

Apple 12.16.15

The chart of Apple shows the struggle of the stock this year. It is now no higher than one year ago. It’s been dead money for that time. Read my article of Aug. 3, 2015: http://dohmencapital.com/why-apple-is-dead-money-at-best/

One year ago it was in an uptrend and went higher. Now the chart looks like a bear market has started. The stock is down just about 18% from this year’s high. A decline of 20% or more is generally considered a bear market.

Furthermore, note the red, thin line, which is the 50-week moving average. The stock price broke that moving average to the downside last quarter. It then bounced back, but stopped underneath that line. That’s called a “throwback” which is normal. That is usually followed by a swift decline.

The $95 level is a Fibonacci 50% retracement (horizontal line) of the prior big rise and thus first support. Hedge fund selling will drive the decline. Because the stock is the highest capitalization in several indices, the general market indices will be hit hard by this.

CONCLUSION:

The fundamentals are negative. When the technical chart data confirms fundamentals as they do now, I get bearish, no matter what the name of the stock. The consumer is spending less, and companies with very costly items will be fighting a losing battle with sales declines. Apple’s 115,000 employees are vulnerable to unpaid vacations of indefinite length.

The markets are now in the phase where the large trading organizations need to raise cash. That means selling on any rally.

Bear markets can be the most profitable of any part of the stock market cycle because it moves faster. With experienced guidance, you too can benefit from a bear market.

Wishing you successful investing,

Bert Dohmen, Founder
Dohmen Capital Research, Inc.

As posted on Forbes.com