Long time ago, in a galaxy that’s basically in our own backyard, China was considered to be the bees knees by Apple. However, as it stands right now, that relationship might be leading the company’s stock price getting stuck. You know, it’s always important to know who your friends are and to be discerning about who you do business with. Perhaps it’s time for Apple to smell the coffee and decide to part ways or at least switch up its relationship with China?
I can’t recall a time in world history where it ever worked out for someone who was close with a communist nation, just saying.
According to Rich Smith of The Motley Fool, Apple’s stock is, right now, in a funk. Apple has been a latecomer to the whole artificial intelligence game, which is proving to be hurtful to the bottom line. The latest information to come out concerning iPhone sales is very disappointing. Shipments of the product are currently down 37 percent year to date in China. Smith notes that with all of this bad news coming out, it’s not at all a shock to see Apple stock losing over $20 of its value since late January. And that’s not even the worst news. The stock might not bounce back anytime in the near future.
Ouch.
In fact, according to Maxim Group analyst Tom Forte, Apple stock could be “dead money” for a “prolonged” period.
Now it’s worth pointing out: Even Forte isn’t saying Apple stock is a sell — he just doesn’t think it’s going to go up much anytime soon, setting a $178 price target over the next year, and so rates Apple hold.
And why does he think that? As StreetInsider reports, Apple gets 18.9% of its revenue from China — where its iPhone sales are cratering under government pressure to stop using the devices. And seeing as iPhone accounts for the majority of Apple’s operating profit, that’s a big drag on growth at Apple. While the company has had some success growing services revenue, the drag on hardware sales, as well as increased regulatory scrutiny of monopolies around the globe, could prevent Apple from growing its sales — or its stock price — much at all over the near term.
Or the long term, either.
Smith then went on to note that the vast majority of analysts tend to see Apple’s profits go up only about 10 percent a year for the next five years. He mentions this isn’t exactly a bad growth rate, but on a stock that costs over 26 times its earnings, this growth will likely not be fast enough to keep the stock price.
“For a high-quality, high-profit-margin company like Apple, you might not expect to ever see a PEG ratio of exactly 1 — but unless Apple can find a way to revive iPhone sales, a 2.5 PEG is probably too much to pay for Apple’s stock,” Smith wrote.
Even big corporations sometimes see bad seasons, right? Take this information into consideration before you decide to pull the trigger on investing in Apple, at least for the meantime.