This commentary originally appeared on Real Money Pro at 8:40 a.m. ET on Monday, March 21. Click here to learn about this dynamic market information service for active traders.
I'm making Apple (AAPL) my Short Trade of the Week this week, having shorted the stock at $106.75 a share prior to yesterday's "Apple Event."
As I wrote in late January:
"I now expect Apple to produce three consecutive quarterly earnings-per-shares results over the balance of the company's fiscal year that are down on a year-over-year basis.
And I project lower and below-consensus results for the full fiscal year as well, down 7% to 10% to around $8.50 a share vs. $9.20 a year earlier. Furthermore, I don't expect fiscal 2017 EPS (which I estimate at $8.75) to meet FY 2015's results.
This means that in order for Apple's shares to rise over the next two years, its price-to-earnings ratio must rise even higher -- something that I don't expect for many reasons."
-- Doug's Daily Diary, Apple Looks Like 'Crapple' To Me (Jan. 27, 2016)
I previously placed Apple on my "Best Short Ideas" list at $111.65 on Oct. 8, but later covered much of my short position in the low- to mid-$90s.
But AAPL rose more than $1 a share yesterday to as high as $107.65 ahead of the Apple Event. And while the stock later reversed gears and ended the session down a penny at $105.91, Apple has been generally trading at about $12 to $13 above its Feb. 11 intraday low of $92.58.
Nonetheless, I continue to believe that Apple's last important product upgrade cycle is over. That's the core element of the short thesis that I expressed for the stock in early January.
The minor new products that Apple announced yesterday aren't likely to reduce the length of the company's replacement cycle. Nor am I upbeat about the new iPhone 7 that APPL expects to deliver later this year.
Instead, I continue to believe that analysts' 2016 consensus forecasts for the stock are too high -- and more importantly, that Apple might not exceed 2015's record profits for years to come.
Lastly, there's been little discussion that Carl Icahn and David Einhorn -- two "hedge hoggers" who are large and committed Apple owners -- reduced their firms' AAPL positions as of year-end 2015. In fact, I wouldn't be surprised if upcoming 13F filings from Icahn Enterprises (IEP) and Einhorn's Greenlight Capital show even more Apple sales.
Add it all up and I'm making AAPL my Short Trade of the Week -- because Apple still Looks Like 'Crapple' to Me.