Furthermore, Credit Suisse expects 2012 revenue to grow 57% to $170 billion from $108 billion last year, and by 25% to $213 billion for 2013.
These are huge numbers and frankly, they just don't seem realistic. That's a 48.6% compound annual growth rate for a two-year period, which basically assumes the same annual revenue growth rate the company has enjoyed since 2008. To assume this could continue and to throw money at the stock is a fool's errand, given the likely future economic weakness in Europe and China.
There are already a few tiny cracks showing that most devotees refuse to acknowledge. For example, iPhone activations at AT&T (NYSE: T
) were down 43% in the first quarter of 2012 to 4.3 million units, compared with 7.6 million units for fourth-quarter 2011. That's significant, seeing as how iPhones represent 60% of all smartphone sales for AT&T. A 43% drop is a big number from Apple's biggest customer. It's also a caution flag.2. Momentum taking over --
According to New York University finance professor, Aswath Damodaran, Apple has become a momentum stock. Momentum investing relies on the acceleration on a stock's price (in either direction). This strategy relies more on short-term price fluctuations rather than fundamentals.
"The new investors of Apple scare me. They're momentum investors," Damodaran told Bloomberg
TV. "Once stocks become a momentum play, intrinsic value
goes out the window." Damodaran is a renowned scholar of intrinsic valuation. He's also done quite well with Apple. He started buying shares in 1997, when they had cratered to about $5. He's selling now. I consider him the smart money.3. Institutional influence --
Institutional investors own about 71% of all outstanding Apple shares. This includes mutual funds
, pension funds, endowments, hedge
funds, etc. Many institutional managers are no different from individual investors in their tendency to get caught up in herd mentality. Manager A owns Apple? Well... we'd better have it too! What? Manager X is shorting it? We need to get on that right away!
I have become very skeptical when a mutual-fund salesman shows me a large-cap equity fund
that supposedly outperformed last year.