Four Reasons to Avoid Apple

Beyond Trading has been bullish on Apple (AAPL) stock for several years. "Apple is an extraordinary successful company, a case study worth to be analyzed in detail by every single University and investors. We are fans of the company and its products, we use them, however we became NEUTRAL on the company given the equation risk/reward going forward", said Sergio Vieira, President & CEO Beyond Trading Corporation.

Apple's stock is not particularly expensive, and in fact we believe there is room for upside to the $166 level. This makes the stock a good trading vehicle for the short term, but not necessarily a good investment having in mind the equation risk/reward going forward.

In our opinion, the iPod story is gone - if you want an iPod, you buy an iPhone, it is as simple as that.

About the iPhone - we do not believe Apple's competitors will improve for some years to come since companies such as Research in Motion (RIMM), Nokia (NOK) or even HTC have done a lousy job of trying to follow up Apple rather than innovating. How could they innovate against the iPhone? Simple: Create it before Apple. In our opinion, Nokia has proved to be incompetent in its sector.

Why are we NEUTRAL on Apple stock at this point?

1. The iPod market is gone.
2. The iPhone market is terrible: crowded, very intense competition, profit margins squeezed. We do not believe Apple will be able to sustain profit margins in some European countries for so long, maybe 9 months. We consider the price of the iPhone in some European markets a "scandal" (this aspect is particularly important providing support for the stock short term and a potential upside to the $166-172 level).
3. Mac sales: The company did actually very well in our opinion, but again we consider the price of those great products very high and there will be a profit margin squeeze going forward. Apple has already announced price cuts across different models.
4. Probably the most important matter to be considered mid to long term: we do not believe in companies without visionaries, and for us Steve Jobs has been the man behind Apple's tremendous success. Maybe we are wrong on our assessment, but we rather prefer to be wrong than to place our bets at risk at this point.

What do we believe Apple can do to justify a higher stock price going forward?

1. Enter the ultra portable market, not with a low cost product but a superior product compared to the competition.
2. Bet on Asian markets, though this will take time. We believe the future might be in these markets going forward. Apple should invest aggressively in these markets.
3. Terminate its contract with AT&T (T).
4. Show that Steve Jobs can be replaced going forward. In our opinion, Apple should already have prepared the market for a successor, to have a clear detailed plan on this matter.

We recommended to close 100% of long positions in Apple at $157 after-hours, and we are downgrading Apple from BUY to NEUTRAL having a maximum target on the stock in the range $166-172.

We are buyers of the stock at lower prices.

Disclosure: no position in Apple.

Comments

[Traffic:]

I'm bored of toaster phones.I went back to the flip phones.I have my laptop for everything else.

Jul 22 12:40 PM

[GSlusher:]

"In our opinion, the iPod story is gone - if you want an iPod, you buy an iPhone, it is as simple as that."
That's silly. Many people, including kids, want a "traditional" music player. Why pay the monthly fees if you don't need the iPhone's data service?

Apple reported selling 5.2 million iPhones, but 10.2 million iPods--nearly TWICE as many. iPod sales were down 7% year-over-year, probably less than most electronics devices.

Jul 22 01:40 PM

[Nikhil N:]

I do not believe the iPod story is gone. Lets not forget the iPod does not come attach with a two year agreement. An iPod is still and will probably remain Apple's most attractive product. Well as long as the iPhone is with the two year commitment, iPod will remain Apple's bread and butter

Jul 22 02:04 PM

[Anthony B:]

I have to agree with your risk/reward analysis at this point. I had been selling puts into this rally but will not be rolling them up anymore. I did just buy a $200 Jan '10 call, to benefit just in case it overshoots a reasonable valuation on the way up.

Jul 22 02:56 PM

[Beyond Trading:]

Let's be honest shall we? today you could have made much more money trading other stock than investing in (AAPL); to give you just an example you could have shorted (PJC) which we recommended to short at $44.9 a few weeks ago. Today you could have done it again! By the way you do not need to insult people just because you are losing money


On Jul 22 02:04 PM Nikhil N wrote:

> I do not believe the iPod story is gone. Lets not forget the iPod
> does not come attach with a two year agreement. An iPod is still
> and will probably remain Apple's most attractive product. Well as
> long as the iPhone is with the two year commitment, iPod will remain
> Apple's bread and butter

Jul 22 03:26 PM

[Hayweed:]

Interesting but in the phone space wouldn't you be better off shorting Rimm which only does phones and is feeling the heat from Apple, Palm, Nokia and all the other wanna be phone makers putting a keyboard on a phone.

Apple at least has an ecosystem of music players, phones and computers which all work together. What does Rimm and Nokia have - phones?

Jul 23 12:29 AM

[Beyond Trading:]

Hayweed,

Thank you for your comment. We did not recommend to sell short Apple (AAPL) in our article. On the contrary it is mentioned the stock still has some upside left in our opinion. Please read the article again. Thank You

Jul 23 06:47 AM

[Jon T:]

iPhone has 'lousy competition' and competitors won't improve for 'years to come' - but - faces 'huge competition' and 'squeezed margins'..?!

The iPod market is 'gone' - but only if you pretend the iPod touch doesn't exist.

Beyond Trading becomes Beyond Belief. Crass analysis and foolish babble. Who ARE bt talking to I'd like to know?

Long APPL btw.

Jul 23 08:29 AM

[Beyond Trading:]

Dear Jon T

We recommended to buy Apple (AAPL) several years ago before split when the stock was trading at $30, we are not trying to convince you not to buy it now; it is your own decision however based on yesterday price of $158 you're already losing money. Buy low; sell high

Jul 23 09:20 AM

[Beyond Trading:]

Dear Anthony B

Thank you for your comment. We expect to be polemic where's people sentiment involved as it is the case in stock market. Facts are facts and the stock market proved us right again; recommendations to subscribers: out of (AAPL) at $157, in (ISRG) before earnings; check StockTalk comments

Jul 23 09:28 AM

[Jon T:]

Author,

I took longer to buy in for various reasons, but still enjoyed getting in at 70, and in 10 years I expect a healthy annual roi.

But my point has nothing to do with the stock price, it has to do with your assessment of Apple's future ability to sell record breaking numbers of Macs, iPhones, and iPods.

Apple is in a position to produce ever more stupendous results over the coming years. A 'Tipping Point' comes to mind.

As an investor, I want to know the future prospects of customers wanting to buy Apple products and their ability to execute. And, with the terrible state of Apple's competition, it faces an INCREDIBLY bright future.

You don't need a degree in stock chart 'interpretation' to see that.

Jul 23 11:18 AM

[Doug, Mtn. ...:]

To use April-June sales data to conclude the iPod is dead tells me that Vieira has no idea what he's talking about. iPod's sales always skyrocket during the Xmas selling season, and we're 180 degrees from that time of earth's orbit. 10+ million iPod sales in the dead of summer? Not bad! What makes more sense as a Christmas gift, a $100 iPod or an iPhone with a $70/mo payment obligation (for two years, no less)? Thanks for the valuable lesson: never employ the services of Beyond Trading.

Jul 23 02:18 PM

[Beyond Trading:]

Dear Doug

We thank you for your comments. We do not make important trading decisions discussing "sex of angels" as it is the case with "ipod is gone or not gone". Stock market proved us right and our role was to inform investors to move capital into other stocks with more potential: ISRG was a great example. Thank you


On Jul 23 02:18 PM Doug, Mtn. View, CA wrote:

> To use April-June sales data to conclude the iPod is dead tells me
> that Vieira has no idea what he's talking about. iPod's sales always
> skyrocket during the Xmas selling season, and we're 180 degrees from
> that time of earth's orbit. 10+ million iPod sales in the dead of
> summer? Not bad! What makes more sense as a Christmas gift, a $100
> iPod or an iPhone with a $70/mo payment obligation (for two years,
> no less)? Thanks for the valuable lesson: never employ the services
> of Beyond Trading.

Jul 23 06:58 PM

[KenC:]

You said, "The iPod market is gone." but undermine yourself when you say, "if you want an iPod, you buy an iPhone" Either way, you buy an Apple product, how is that a reason to avoid Apple?

You said, "The iPhone market is terrible: crowded, very intense competition, profit margins squeezed. We do not believe Apple will be able to sustain profit margins in some European countries for so long" and you undermine that by saying, "we do not believe Apple's competitors will improve for some years to come since companies such as Research in Motion (RIMM), Nokia (NOK) or even HTC have done a lousy job of trying to follow up Apple". So, while the market is crowded, you don't think Apple's competitors will improve for years, so what is there to fear?

As for profit margins, do you KNOW what margins Apple has on the iPhone? Gross margins are about 70%! How are they going to be squeezed? They have more room to adjust prices down than any of their competition! Their competition will be bankrupt before Apple doesn't make a profit on the iPhone.

You said, "Mac sales: The company did actually very well in our opinion, but again we consider the price of those great products very high and there will be a profit margin squeeze going forward" Macs have always been expensive. Why are they going to be squeezed now, after so many decades? There's no rationale behind your suppositions.

You said, "Probably the most important matter to be considered mid to long term: we do not believe in companies without visionaries" So, other than Apple, what companies are you invested in that have comparable visionaries? Any? What do you know about Steve that we don't know?

Your four points are poorly supported, and in fact, have very little basis in fact.

Jul 24 02:29 PM

[Beyond Trading:]

Dear Ken

Thank you for your comments. In case you read the article it clearly says Apple (AAPL) has room to go up to the $166-172 level. The article also points out important issues where Apple (AAPL) can improve justifying a higher valuation. We did not recommend to sell short Apple (AAPL). The rationale behind our comments is the fact we do listen to consumers. Have you noticed the fact we are actually fans of Apple (AAPL) products mentioned on the article?


On Jul 24 02:29 PM KenC wrote:

> You said, "The iPod market is gone." but undermine yourself when
> you say, "if you want an iPod, you buy an iPhone" Either way, you
> buy an Apple product, how is that a reason to avoid Apple?
>
> You said, "The iPhone market is terrible: crowded, very intense competition,
> profit margins squeezed. We do not believe Apple will be able to
> sustain profit margins in some European countries for so long" and
> you undermine that by saying, "we do not believe Apple's competitors
> will improve for some years to come since companies such as Research
> in Motion (seekingalpha.com/symbo...), Nokia (seekingalpha.com/symbo...)
> or even HTC have done a lousy job of trying to follow up Apple".
> So, while the market is crowded, you don't think Apple's competitors
> will improve for years, so what is there to fear?
>
> As for profit margins, do you KNOW what margins Apple has on the
> iPhone? Gross margins are about 70%! How are they going to be squeezed?
> They have more room to adjust prices down than any of their competition!
> Their competition will be bankrupt before Apple doesn't make a profit
> on the iPhone.
>
> You said, "Mac sales: The company did actually very well in our opinion,
> but again we consider the price of those great products very high
> and there will be a profit margin squeeze going forward" Macs have
> always been expensive. Why are they going to be squeezed now, after
> so many decades? There's no rationale behind your suppositions.<br/>
>
> You said, "Probably the most important matter to be considered mid
> to long term: we do not believe in companies without visionaries"
> So, other than Apple, what companies are you invested in that have
> comparable visionaries? Any? What do you know about Steve that we
> don't know?
>
> Your four points are poorly supported, and in fact, have very little
> basis in fact.

Jul 24 02:46 PM

[AGuysOpinion:]

To Author,

Wait.. wait.. wait..

In response to your comment:
"Let's be honest shall we? today you could have made much more money trading other stock than investing in (seekingalpha.com/symbo...); to give you just an example you could have shorted (seekingalpha.com/symbo...) which we recommended to short at $44.9 a few weeks ago. Today you could have done it again! By the way you do not need to insult people just because you are losing money"

so let me get this straight. We could have made more money investing in other stocks than Apple.. and as an example you cite your recommendation to short Piper at $44.9 a few weeks ago. Then you say today you could do it again.. because Piper is still at $44.3.. which means you wouldn't have made any money shorting it.. which means your recommendation was completely worthless? Also if you are making recommendations with turnaround times of less than a few weeks I don't see why you'd bother discussing the long-term fundamentals of Apple. If you think Apple is ahead of itself and could pull back a bit.. sure. But thats not an analysis of its long term opportunities which are in my opinion.. tremendous.

Jul 24 04:49 PM

[Beyond Trading:]

It's obvious you're do not know what you're talking about but we were expecting replies such as yours from people buying up here instead of us cashing a 1000% return. For your information, Apple (AAPL) executives admit the Ipod is gone "executives said they expected its "traditional MP3" business -- the iPod classic, nano, and shuffle -- to continue its decline"; when we say it's gone; it is not going to disappear, in plain English, the growth story is gone.
Moreover, Iphone has indeed replaced the Ipod in several cases teach2blog.blogspot.co...
Please include sound reasons next time you decide to reply to one of our articles if it is not just to get positive reviews on your posts trying to bash a serious work backed up by Apple itself


On Jul 22 01:40 PM GSlusher wrote:

> "In our opinion, the iPod story is gone - if you want an iPod, you
> buy an iPhone, it is as simple as that."
> That's silly. Many people, including kids, want a "traditional" music
> player. Why pay the monthly fees if you don't need the iPhone's data
> service?
>
> Apple reported selling 5.2 million iPhones, but 10.2 million iPods--nearly
> TWICE as many. iPod sales were down 7% year-over-year, probably less
> than most electronics devices.

Jul 26 06:42 PM

[Beyond Trading:]

Dear Sir,
Thank you for your comment. I believe you have problems with the English language; our article in (PJC) went out when the stock was trading at $45 and before it sold off to $39.7 ahead of earnings. Our subscribers profited from the sell off if you did not it is your own problem but clearly you do not have any rules in trading regarding profits taking rules as well as other important trading matters. In (AAPL) with the stock at $157.6 you made 60 cents in one week, congratulations but for our subscribers 60 cents in one week when market has had one of its best rallies is deserves clearly a laugh....


On Jul 24 04:49 PM AGuysOpinion wrote:

> To Author,
>
> Wait.. wait.. wait..
>
> In response to your comment:
> "Let's be honest shall we? today you could have made much more money
> trading other stock than investing in (seekingalpha.com/symbo...);
> to give you just an example you could have shorted (seekingalpha.com/symbo...)
> which we recommended to short at $44.9 a few weeks ago. Today you
> could have done it again! By the way you do not need to insult people
> just because you are losing money"
>
> so let me get this straight. We could have made more money investing
> in other stocks than Apple.. and as an example you cite your recommendation
> to short Piper at $44.9 a few weeks ago. Then you say today you could
> do it again.. because Piper is still at $44.3.. which means you wouldn't
> have made any money shorting it.. which means your recommendation
> was completely worthless? Also if you are making recommendations
> with turnaround times of less than a few weeks I don't see why you'd
> bother discussing the long-term fundamentals of Apple. If you think
> Apple is ahead of itself and could pull back a bit.. sure. But thats
> not an analysis of its long term opportunities which are in my opinion..
> tremendous.

Jul 27 10:48 AM

[JW.USC:]

I feel sorry for anyone who ever followed the shoddy investment advice of the genius "ANALysts" at Beyond Trading.

More like Beyond Stupid.

Nov 09 04:27 PM