Shares of Apple Inc. (NASDAQ:AAPL) experienced their second-biggest one-day rally on Wednesday after the company announced its quarterly results. Most people looking at the stock’s soaring price believe everything here is awesome.
However, what I see is blatant manipulation by Apple’s management and market insiders.
Most people who casually follow the market don’t understand the games played by companies and market insiders.
Welcome to our latest issue of issue of ValueWalk’s hedge fund update. Below subscribers can find an excerpt in text and the full issue in PDF format. Please send us your feedback! Featuring hedge funds avoiding distressed china debt, growth in crypto fund launches, and the adapting venture capital industry. Q3 2021 hedge fund letters, Read More
You see, even though Apple stock closed up 6.5% yesterday, the only thing that really matters for the company is in steep decline…
The thing I pay most attention to when I buy a stock is the company’s sales. The firm’s revenue is the foundation of any operating company. If you have no sales, you can’t have profits. If you have no sales, you can’t have cash flow. And if you have no sales, you have no customers.
When determining whether to buy a company’s stock, the first thing I’m looking at is sales.
From my experience, I can tell you that most company management teams hesitate to manipulate sales. It’s a bit harder to do, and bean counters can tell pretty quickly if a company is misstating its sales.
However, it’s incredibly easy to manipulate profits or earnings. Many companies invent their own ways to state their profits. It’s what I call “everything but the bad stuff” accounting.
Apple Earnings Smoke and Mirrors
With Wall Street’s preference for accounting shenanigans and sleight of hand in mind, let’s look at Apple.
Overall, Apple reported that sales were down 15%. The company’s main source of sales — iPhones — was down 23%. What’s more, sales in China — which used to be Apple’s fastest-growing market — were down 29%. And sales in the Americas — Apple’s largest geographic market — were down 6%.
The only sales number where Apple is seeing growth is in services, which was up 19%. It’s no wonder then that CEO Tim Cook used the word “services” eight times in his opening remarks.
However, services represent just $6 billion, or 14% of total Apple sales of $42.3 billion. Truth is, Apple’s services division will never be big enough to offset the massive decline in growth in iPhones.
In my experience, the combination of Apple’s massive sales decline and the fact that Apple CEO Cook is highlighting “services” is the kind of manipulation that tells me a stock is going to fall.
Don’t Get Suckered by Wall Street
We have a company that is facing declining sales growth across the board, and yet the shares spiked sharply higher in trading. How could that happen?
It’s an instance of Wall Street crooks trying to get you to buy stock that they are trying to dump.
You see, they know that most people won’t read Apple’s financial statements to find out that its business is in decline. However, they know that everyone will read in the news today and tomorrow that Apple’s stock is up.
And these Wall Street crooks know that they’ll get most people to hold on to their stock instead of selling it. The sharp rebound will also interest others in buying shares.
Once they get these suckers in, Apple’s stock will resume the downtrend it started in April 2015 when it peaked at $131.
If you’re shocked, you shouldn’t be. Wall Street and company management teams play games like this all the time. It’s why Apple is one of the companies in my 3 Ticking Time Bombs to Avoid special report that you can read here.
If you’re looking to take advantage of the growth happening within the tech sector, there are better stocks out there than Apple, and I’ll be keeping you locked in to those opportunities.