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Apple Stock: This Is Not A Buying Opportunity

Apr. 05, 2021 12:21 PM ETApple Inc. (AAPL)BMWYY, META, VWAGY249 Comments
Fishtown Capital profile picture
Fishtown Capital


  • Apple has dropped 5% this year even after beating Q1 earnings estimates in late January, yet the shares still do not present an attractive buying opportunity.
  • Apple's estimates for the next two quarters, while set significantly above prior years results, should meet expectations on strength from 5G iPhone sales.
  • Later in 2021, Apple results could come under significant pressure when 5G iPhone sales slow as consumer spending shifts away from electronics towards travel and other activities.
  • I believe Apple's FY22 estimates are far too high and FY22 results will come in below FY21, which should pressure the share price.

Apple Inc Logo in Brushed Metal Store Facade
Photo by PeskyMonkey/iStock Editorial via Getty Images

My previous article on Apple (NASDAQ:AAPL) where I said Apple is a Sell generated an enormous amount of heat in the comment section from Apple bulls. Admittedly, the short-term timing wasn't good

This article was written by

Fishtown Capital profile picture
Individual investor and family office principal with over 20 years of investment experience. I favor fundamental analysis and look for individual issues and asset classes that are out of favor and represent a good risk/reward trade off. I often employ options strategies, covered calls on companies I own that have gotten ahead of themselves, and writing puts on stocks that I'd like to own at lower prices.Educational background Finance MBA (NYU Stern) with Computer Science undergraduate.

Analyst’s Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

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Comments (249)

This article has not aged well. :)
Doc 224899 profile picture
So, you shouldn't buy AAPL if you support the idea of democrats taxing big tech corporations to death and punitively over-regulating big tech corporations.

I just shrug, expecting conservatives to take at least one house of congress, and holding or increasing the elections of conservative state level candidates. That would benefit all of us invested in "big tech", including everybody getting retirement benefits, and everybody interested in working for a living..

Disclosure: I own AAPL stock. I'm not inclined to sell at this point, expecting steady growth over time.
The author of this tripe has already been proven wrong since Apple is up about 10 points since he wrote this. It really was a buying opportunity for Apple when this garbage was written.
Fishtown Capital profile picture
@DWBowers More like 4 points, and all of big tech has been on fire this week.

Maybe you can respond with something in the article you disagree with, rather than just being another anonymous jerk on the internet spiking the ball over 3 days of short term stock movement?

You have a great Friday!
LookingAtStocks profile picture
@Fishtown Capital Spot-on response to this clown!
@Fishtown Capital Apple is Berkshire's largest holding. You certainly don't have any better insight into Apple than Buffet. Put your money where your mouth is an short it and let us know how that works out 6 months from now. This article is no different than the many others that came over the past 10 years that were wrong.
Sergi Medina profile picture
It's one of my best investments. I agree completely with you.
How about now??? LMAO!
thorgood4 profile picture
new PT's are much higher -
Didn’t read all the comments so forgive me if I’m repeating someone’s line, but aapl is notorious for sandbagging estimates. Another upside surprise could definitely be in the cards. Any plans to boost dividend and/or increase buybacks, plus possible growth plans in the works could send the equity back to recent highs.

And I heard someone on tv talk about index buying boosting faang stocks so it must be true. :)
Fishtown Capital profile picture
@Humble_Modesty Apple didn't provide any estimates/guidance because of COVID.

They're already spending more than 100% of their cash flow on dividends and buybacks - they're actually issuing debt to fund more of it.

Apple is the top company in many indexes. There's no incremental buying past what inflows into the funds there are.
@Fishtown Capital

Thanks for reminding me. And I could be wrong, but wouldn’t that be all the more reason to believe estimates could be low?

Per SA, their net debt appears to be less than half of ebitda and their payout ratio is only 18%. Buybacks are better for shareholders long term and their cost of capital is a joke. Like I said, I could be wrong, but don’t see a balance sheet problem.
Fishtown Capital profile picture
@Humble_Modesty Analysts know they're doing this. It's incorporated into the estimates.

I didn't state or imply they had a balance sheet problem. They don't. I'm just stating a fact.
terryongarland profile picture
Credible opinion..the article has merit, but the other views of the Apple future are much more optimistic. Owning AAPL for decades has paid for my lifestyle So I am biased, but the market in tech wonders is now going to go exponential imo, because of leaps in AR and AI. Quantum computing is going to rock our world. So bullish on the market long term, but expect that Government policies could screw up things for a bit.
Infinitegame profile picture
I find this article about future growth potential of Apple and many points raised here to be irresponsible and highly personally biased. I will name two points below.

1. “At the same time, sales momentum from early adopters of 5G iPhones could begin to slow.” This seems to be too big of a brush stroke. Isn’t the whole point after early adoption is mass adoption and acceleration for adoption growth? 5G will take at least half a decade to properly implement. In the early phases over the next two years there wouldn’t be a need for home WiFi anymore. The phone can become a hotspot for the entire network and that’s how powerful 5G is, and when you are outside you could finally remotely stream high definition video with friends and family. People moving their budget to travel doesn’t mean people will buy less phones. People will take more videos, more pictures and require more offline and cloud storage as file size and definition ramps up, and people will want to communicate more on the go instead of less (AirPod is a good example) and with less delays. No to mention application of AR in IKEA, HomeDepot, gaming as Pokémon Go and entertainment like Snapchat lenses will all significant benefits from 5G and more advanced hardware. With each yearly refresh people will want the latest software and hardware IF whenever they can afford it - and Apple has shown signals that it will offer hardware subscription service to reduce the cost of iPhone ownership further.

2. My second point is around Huawei or Android ecosystem in general. Huawei’s offering has significantly lagged Samsung in software and hardware in 2020. Just because the ban is lifted doesn’t mean they will immediately recover. In fact they were so afraid at long term ban and changed their OS strategy completely and it will add and cost the company to revert back to the Google ecosystem. A few months delay here and there and the lingering trust issue (look at $baba) with China makes Huawei incapable to compete with Samsung in the short term. Now back to Samsung. We have seen LG have decided to exist the market, and Samsung is the major player left in the game. I won’t go deep into the value of vertical integration from chipset to payment to software Apple has but just look at profit margins the way Samsung build phones with third party OS, App Store and inferior chipset without a vertically integrated ecosystem means the business is less efficient long term and Apple’s lower end offering in the recent years is a major threat now to Samsung.
Fishtown Capital profile picture
@Infinitegame Apple's EBT (earnings before tax) has gone no where since 2015. If anyone is biased and irresponsible, it's the Apple bulls who think the worlds largest company still has massive growth in front of it.
Max Baer profile picture
@Fishtown Capital - FY 2015 was an outlier year, which is why you (and other Apple bears) like to use it as the benchmark for your fallacious narrative. The fact of the matter is that Apple is likely to exceed $4.50 EPS for the current fiscal year, and the company is on track to smash all previous net income records.

It should also be noted that in the short time since you posted this article at noon on April 5th, AAPL shares are already up a healthy $7.50. I’m setting a reminder to add to my Apple holdings the next time you come out with one of your predictably tendentious anti-Apple screeds.
Fishtown Capital profile picture
@Max Baer What specifically in the article do you disagree with? Because I thought it’s fairly balanced. Specific points?
Everyone is entitled to their own opinion, that is what makes a market. I think 6-12 months from now, you will have wished you owned AAPL. You cannot deny the company's success in both technology and building an extremely valuable consumer tech franchise. The strength and sustainability of AAPL's cash flow has significant value and is currently undervalued in the current stock price. AAPL's current forward P/E is around 25x, not extremely high for a company of this quality and low compared to other quality consumer franchises such as COST, SBUX and DIS that all trade in mid-30s P/E or higher on forward earnings. The growth in services will have a meaningful long term benefit in further solidifying AAPL's sustainable free CF which, again, is not fully discounted in the current stock price. This has positive implications for a secular re-rating of AAPL stock valuation. The argument that in an economic re-opening scenario, people spend more time outside and slow their buying of phones makes no sense to me. If the economy is booming, and more people are employed and have more income to buy stuff, that would seem to be very positive for sales of AAPL's new products.
Fishtown Capital profile picture
@truckster This is the best counter argument I've heard yet. Kudos.

Not to quibble too much, but the forward estimate for 2022 is over 27x.. and I don't think they can hit it. I think they do closer to $3.80-$4 in 2022, which makes them over 33x P/E.

Regarding electronics, specifically PC's and iPads - you don't think consumers trapped at home drove extra demand for PC's, iPads, and other electronics? I sure do, and I think it reverts next year. Could be wrong, but I doubt it.
Prudent Top Sawyer profile picture
Comparing with tsla aapl is deep f*cking value. PE od 25x for aapl is lathable. Pe 40 can be easly
techy46 profile picture
Agree wait for $AAPL to go back to $90 along with $MSFT.
@techy46 you should short it if you really think that
techy46 profile picture

No way, I already pocketed my technology rewards.
LookingAtStocks profile picture
@techy46 I highly doubt that'll happen, but with Clown Mush Brain Biden ruining America day by day, he just could destroy our economy and stock market!!
Intel laptops and pre-12 iPhones will be obsolete within 2-3 years, so the user base will be forced to upgrade into new hardware. Perhaps the stock is slow in the interim, but barre a combination of major set-backs, I actually think Apple will have a big growth again. With their resources, it's also hard to bet against whatever they offer to the EV industry, whether it is an actual luxury car or just the autonomous software.
Fishtown Capital profile picture
@candidate7000 I think your assumption that lots of very good laptops and iPhones will be suddenly obsolete won't play out and more than any other upgrade cycle.
techy46 profile picture

That's quite amusing I'm still using Lumia 640 I bought at Wally's for $40.

I still drive my 1970 Mach1 I bought in Nov, 1969.

I know many people that still have flip phones.
I love these "fishy" articles. Buy, sell, buy sell. This is a great company with good financials and a history of returning shareholder value as well as a historical innovative pipeline. Don't be surprised when Apple unveils its next advancement in technology. Remember, they are not just sitting around in R&D. This is a long hold. What's the turnover rate up in Fishtown's portfolio(s)? Apple is cash rich and very capable. In another month we will see some street pundit shouting "buy", price target $185. It's never quite right is it?
Made Easy - Finance profile picture
High expectations do not equate to unrealistic expectations. That's where the integrity of your article falls apart. You did not take into account new innovative products like the M1 chips, AR, potentially Apple Car, etc. That's why you felt it's overvalued and the expectation won't be achieved.
Fishtown Capital profile picture
@Jireh Chan Yi-Le Yes, I certainly took those into account, as do the analysts that put out the official estimates. The "but but but cool new products!" thesis has been well articulated by other commenters. It's known.
Made Easy - Finance profile picture
@Fishtown Capital Noted, I guess thats already your underlying assumption since you didn't extensively elaborate on that.

Do you think what we see will be the new normal or will it revert back to pre-covid valuations? It seems the government doesn't want anything to crash, the latest is the property market.
Fishtown Capital profile picture
@Jireh Chan Yi-Le I certainly don't see it dropping back into the $70's like it was pre-COVID. But I like $100-110 level is realistic if this holiday quarter shows a big drop from last holiday quarter (which I think it likely.)

All of a sudden then FY22 looks like maybe $3.80 in EPS instead of $4.50 and it's now a 35x P/E stock again with slow growth
sixpackistan profile picture
Apple silicon - M1 and M1X - will be a game changer for them.
Apple is growing services, introduced the M1, has AR on the roadmap, and the 5G upgrade cycle is just getting started. This author calls the lack of any reasonable competition a "wide moat." This article won't age well.
Mrnomad profile picture
“iPhone sales slow as consumer spending shifts away from electronics towards travel and other activities”. Where's the historical, background information to support that claim? You add: “Too much too fast: Apple shares have tripled since early 2019”. Whose to say what’s too fast? Tesla? AAPL got hit when the 10 year spiked but the 10 year peak appears to be in sight.

Traders who focus on S&P100 tickers look at the laggards and chose them simply because they haven’t risen as much. We agree on this: “I have tremendous respect for Apple and its management”. AAPL has proven to be resourceful and creates great products.

The only way Huawei will be allowed to enter the US during the Biden admin is if they disclose every line of their embedded code and that’s not likely to happen.
Thanks you for your honesty and effort with this article. While I have shares of Apple in my portfolio I do agree with you that it is not a buy. For a company that is cash rich and not using the funds properly to grow the company, I agree it is not a buy but a hold for those that own it. Buy backs help keep the price up and is good for the executives options but is not the answer for growth or stock appreciation. Cook seems to think this is the answer rather than take a leap and buy another business. M&A is not in his vocabulary.
Yes improving the current products is great and the prices can be raised but that it limiting the stock price and buyers budgets. Instead of finding fault with other companies and their business practices, he should look inward at what he should be doing. Furthermore, any interest in an electric vehicle is just to get the software in the car. He does not allow anyone to control anything or even have much of a say and is not working in his favor now that Apple is no longer a must own stock.
@Up and Away "Cook seems to think this is the answer rather than take a leap and buy another business. M&A is not in his vocabulary." Really?!?www.bbc.com/...
Fishtown Capital profile picture
@Up and Away Appreciate you reading and thank you for the thoughtful comments. I agree.
What did I miss on the M&A end? Small companies contribute to the existing only and Face ID is not what people seem to want. I am speaking of a market moving event. Can you imagine if he had bought NFLX years ago?
Apple's board didn't split the stock just to see it go dramatically lower. Cook and company are executing on a plan. They know new products will be introduced and the stock will go higher. Buy Apple, don't trade it!
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