What is Apple’s highest stock?
If you’re a tech stock hater like me, this is something of a personal victory. If Apple’s astronomical price of around $256 a share means anything to you. Then you should be crushed. Because, as Bill Gross points out in this note. Apple is only a $300 stock.
Apple stock has a one-month return of 158%, with the stock moving from $150 to $199 a share(gross). Gross argues that Apple is a “total catastrophe.”
And if you’re feeling very emotional, you might also consider this correlation. In the summer of 2016, Apple made news for losing its market cap, overtaken by Amazon. But now that Amazon is at a seven-year low. Apple is back, growing its market cap at a blistering pace. And threatening to overtake Amazon.
Since July 2014, Apple’s stock has grown from $104 to $200 per share. Now, since July 29, Apple’s market cap stands at $898 billion. If you had bought Amazon back in July 2014. You would be up a whopping 1,799%, almost 10 times your initial investment. With a worse year for the technology sector than the year prior. Amazon is a pure loser.
Is Apple a stock or an interest-rate dependent Ponzi scheme?
There are some big reasons why Apple can potentially be a loss-making investment for investors.
- No. 1: on Friday, Apple reported earnings. The company said its revenue was down year-over-year, and earnings were down slightly too, but this isn’t a big surprise. Apple, like most tech stocks, has sold off. But Apple’s revenue was up a little from last year, and more importantly, Apple beat on earnings.
- No.2: Apple’s stock jumped 2.75% on Friday, which makes me think this beat on earnings was a big deal. But the stock really spiked on Tuesday when Apple announced its earnings were better than expected. Apple said that for its third quarter of fiscal year 2017, it earned $2.10 per share, on revenue of $53.3 billion, compared to earnings of $1.90 per share, on revenue of $50.6 billion in the third quarter of fiscal year 2016.
Why would I still worry about Apple?
I can’t explain it. Gross argues Apple’s earnings are backed up by a “stock as an interest rate dependent Ponzi scheme.” Gross said Apple’s stock will never see a decline in price of less than 15%. That’s because Apple pays a dividend of $3.22 per share, which is “massive”.
Apple’s dividend has been at that level for eight years, and Gross said this won’t change. But the stock doesn’t pay its dividend by selling earnings, it pays it by selling stocks, not by selling actual cash. So there is no short-term cash flow at all. The dividend will be pulled from Apple’s balance sheet, and Gross argued Apple is a stock where the price of the stock does not reflect the financial reality. Gross said Apple has been able to sell $30 billion of stock per quarter, without producing a drop in its stock price.
So, Apple is very much in this regard a stock that is “not worth buying” as an investment.
“Apple has no future earnings and is a stock as an interest rate dependent Ponzi scheme,” Gross said.
“The problem is that Apple is doing this by selling and trading only Apple stock,” Gross added. “Apple has no interest in becoming a true asset-backed security. It doesn’t need to. Apple’s stock is like a tax-free bond, not a credit card. Apple doesn’t need to increase its debt load because Apple is doing just fine on its own, just trading those bonds and converting the revenue to stock. A credit card company has to pay interest to acquire customers. Apple can easily issue additional debt to buy back the cash from its existing shareholders. This is how it is doing this.”
Ultimately, Apple has over $100 billion in net cash, not to mention a huge amount of long-term debt, and Gross believes Apple will have little choice but to issue more debt, “if it wants to keep doing this.”
So what do you think? Is Apple a buy?
Investors who are nervous about owning Apple should stay away from Apple. Tech stocks are slumping, and it’s getting worse for Apple. That’s no coincidence. Buy the stocks that have fallen the most, then hold them. Apple’s stock price is sinking, and it’s getting worse for Apple
Stocks are breaking out from a lengthy period of weakness These tech stocks are poised to break out from this miserable period
How many “billionaires” does the stock market need?
This is what happens to Apple’s stock, when it hits its low for the year. A giant tech fund is suddenly buying Apple Shares of Apple are up more than 30% this year Apple stock is a pure risk stock, and not worth buying at these levels. Apple is about to hit another record.
