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Apple Can Become the Next BlackBerry
Bad news...
"Can Apple, Inc. (AAPL) really suffer the same fate as BlackBerry Limited (BBRY)? Amid worries over slowing iPhone sales and the company's perceived weakness at innovation, UBS analyst Steven Milunovich believes a BlackBerry-type downfall would be Apple's worse case scenario.
In a research note to investors Tuesday, pointing to Apple's current stock price, Milunovich said, “Our most bearish case is a Blackberry-like fall from grace, putting the stock around $70.” (See also: Apple Stock Declines After Insiders Sell Shares .)
The analyst argues that the market has already priced in the likelihood that Apple's best days are gone and they're not coming back. Apple shares closed Tuesday at $99.03, up 0.41%. The shares have fallen 25.5% from their 52-week high and are down 23% over the past year. In his opinion, the stock is cheap for a reason.
The market has become pessimistic about Apple's growth potential and sees no routes for multiple expansion. But assuming the shares did decline to $70 in BlackBerry fashion, this would mark an additional fall of 30% from Tuesday's closing price. This would mean Apple would be valued solely on its cash on hand with no growth factored in.
“If iPhone goes the way of the PC at 5-10% annual declines, the stock could be worth about today’s price,” Milunovich noted. “Given the size of the iPhone and the historical difficulty in maintaining hardware margins, this is a reasonable possibility though probably too negative.”
In other words, the shares will be supported by Apple's cash and or slowing iPhone sales, while acknowledging there's a ceiling on how high the stock can go until Apple comes out with the next big hit product. And that's something BlackBerry is still waiting to produce. (See also: Apple's New Business: Bonds.)
Can Apple, Inc. (AAPL) really suffer the same fate as BlackBerry Limited (BBRY)? Amid worries over slowing iPhone sales and the company's perceived weakness at innovation, UBS analyst Steven Milunovich believes a BlackBerry-type downfall would be Apple's worse case scenario.
Not Exactly Apple's and OrangesIn a research note to investors Tuesday, pointing to Apple's current stock price, Milunovich said, “Our most bearish case is a Blackberry-like fall from grace, putting the stock around $70.” (See also: Apple Stock Declines After Insiders Sell Shares .)
The analyst argues that the market has already priced in the likelihood that Apple's best days are gone and they're not coming back. Apple shares closed Tuesday at $99.03, up 0.41%. The shares have fallen 25.5% from their 52-week high and are down 23% over the past year. In his opinion, the stock is cheap for a reason.
The market has become pessimistic about Apple's growth potential and sees no routes for multiple expansion. But assuming the shares did decline to $70 in BlackBerry fashion, this would mark an additional fall of 30% from Tuesday's closing price. This would mean Apple would be valued solely on its cash on hand with no growth factored in.
“If iPhone goes the way of the PC at 5-10% annual declines, the stock could be worth about today’s price,” Milunovich noted. “Given the size of the iPhone and the historical difficulty in maintaining hardware margins, this is a reasonable possibility though probably too negative.”
In other words, the shares will be supported by Apple's cash and or slowing iPhone sales, while acknowledging there's a ceiling on how high the stock can go until Apple comes out with the next big hit product. And that's something BlackBerry is still waiting to produce. (See also: Apple's New Business: Bonds.)
The Bottom LineTo be sure, it is not suggesting a downfall for Apple is imminent. His firm has a buy rating on the stock with a 12-month price target of $115. This assumes a 16% climb from current levels. Rather Milunovich is pointing out that, given Apple's dependence on slowing iPhone sales, the stock will struggle to deliver any meaningful premium."
Wait and see.
Bien à vous.
PGR
Tags : Apple downfall
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