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Owners of Apple Stock Should Be Afraid

Larry Ramer

If I was an owner of Apple (NASDAQ:AAPL) stock, I’d be very worried about my investment, partly because there are multiple signs that the company itself is worried about its outlook.

Source: George Dolgikh / Shutterstock.com

Yesterday Apple revealed that it will only charge $699 for its cheapest new iPhone, “$50 below what many analysts were expecting,” according to MarketWatch. Coming after its iPhone revenue dropped meaningfully last quarter, the lower price (AAPL has previously routinely charged $1,000 for some of its new iPhones) indicates that AAPL is worried about further declines in demand for its flagship product.

This lower price looks like an admission of weakness. Apple’s decision to only charge $4.99 per month for its Apple TV+ content streaming offering, versus the $7.99-$9.99 that the Street was expecting, probably indicates that it does not expect to be able to compete very well with Netflix (NASDAQ:NFLX) and Disney (NYSE:DIS), given its limited content. Marketwatch made that point, which I’ve warned about in the past.

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In addition to being tacit admissions of weakness, the pricing decisions will, of course, have negative implications for Apple’s bottom line. And in combination with tariffs, the low iPhone price will probably significantly cut into its margins. Moreover, the low price point of the streaming product will likely turn it into a loss leader for the foreseeable future.

Far from rescuing Apple stock, as many analysts and pundits had anticipated, the streaming offering actually looks poised to weigh on the company’s bottom line.

Cook’s Largely Overlooked Sale of Apple Stock

On Aug. 24, Apple CEO Tim Cook received 560,000 shares of Apple stock. However, according to Barron’s, “Apple withheld 294,840 shares to satisfy tax-withholding requirements.” On Aug. 26, Cook  sold all of the Apple stock he was eligible to unload from the shares he had received two days earlier, for $54.7 million. Cook’s decision to sell every share he could out of the Apple stock he was awarded on Aug. 24 doesn’t show too much confidence in the outlook of AAPL stock.

The New iPhones and More Trouble on the Way

The main attraction of the new iPhones seem to be their highly-advanced cameras. If tens of million of American consumers were willing to pay a great deal for highly advanced cameras, GoPro (NASDAQ:GPRO) stock would be trading around $200 per share, instead of around $4.60 per share. So I don’t expect Apple’s new iPhones to sell very well.

Moreover, the new iPhones lack 5G capability, which could reduce their attractiveness in the eyes of many consumers who are anticipating the new technology.

Also likely to weigh on sales of the new iPhones is the foldable phones that Samsung is due to launch Friday. Foldable phones can essentially be made into tablets. Although Samsung will charge $2,000 for its foldable phone, since the device removes the need to have a separate tablet, the price is really not so high. And the foldable phone is way higher on the coolness scale than more advanced cameras. As a result, Samsung’s foldable phone, called the Galaxy Fold, is likely to meaningfully lower Apple’s smartphone market share and Apple stock.

Also likely to continue to hurt Apple’s results and Apple stock is competition from lower-priced Chinese-made phones. Apple will face tough competition on the lower end from these Chinese companies and on the higher end from Samsung’s foldable phone.

Finally, Apple is already making changes in response to the antitrust probe of its competitive practices. More of these changes are likely on the way, and, cumulatively, they probably will weigh on Apple’s results and Apple stock.

Owners of Apple stock should be afraid at this point. They should probably follow Cook’s lead and sell many shares of AAPL stock.

As of this writing, the author did not own any shares of the aforementioned securities.

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