Dear Mr. Berko: I bought 100 shares of Apple at $129 last June, believing it could move up to $200. I’m down by 21 points. What’s your opinion? Do you think I should sell Apple?
— SA, Oklahoma City
Dear SA: Apple (AAPL-$108) is the world’s most valuable enterprise, with a $600 billion market cap. AAPL is sitting on more than $215 billion in cash and produced $234 billion in revenues last year. The iPhone, AAPL’s most profitable product, generated about 67 percent of revenues last year. But though 75 million iPhones were sold during AAPL’s most recent quarter, those sales were flat compared with the same period last year. Meanwhile, revenues from iPads, Apple Watches and Macs, which cratered last year, are facing tough competition from less expensive and nimbler competitors. Revenues from AAPL’s ancillary products were up well last year, but not significantly enough to appreciably boost earnings.
AAPL is vitally important to Wall Street; about 62 percent of its 5.5 billion shares are owned by over 2,400 institutions, mutual funds, hedge funds, closed-end funds, exchange-traded funds, corporate raiders (Carl Icahn owns 52 million shares), pension plans, college retirement funds, bank trust accounts and private and foreign investors, and they’re used as collateral for big bank loans. A falling AAPL could create a minor catastrophe! Because Apple is so important, there’s a very tall wall of silence around the Street’s finest to avoid negative comments. Comments failing to laud AAPL are blasphemous, un-American and bad manners. The closest thing to a negative AAPL comment was a remark by UBS analyst Steve Milunovich: “The bottom may not be far away.” And he reduced his 12-month target price to $120 from $130.
What can AAPL do for an encore? Apple’s research and development team and its marketing department have produced ignoble failures, such as iPod Hi-Fi, Newton, Apple Maps, Pippin, G4 Cube, Lisa, Apple Watch, MobileMe, iOS8.0.1, Copland and Apple Mouse, to name a few. And I’m certain as sunshine that Apple’s participation in driverless car technology will fail ignominiously and produce a juicy tax write-off.
