Apple Inc. (NASDAQ:AAPL) has been downgraded from Hold to Sell by analysts from ABG Sundal Collier. They believe that the new iPhones and iPads will not reverse Apple’s trends. They also suggest that activist investor Carl Icahn’s recently disclosed stake in the company may end up causing even more problems.
New iPhones expected September 10
Just a short while ago, Apple Inc. (NASDAQ:AAPL) all but confirmed that the next iPhones will be out on September 10. The company sent out an invitation to a media event scheduled for that date. However, ABG analysts believe investors should not lose sight of “Apple’s loss of market share, diminishing pricing power, stagnating revenues and eroding earnings.”
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They don’t believe that the new iPhones or iOS 7 will be enough to reverse these trends, and expect instead that the cannibalization demonstrated between the iPad and the iPad Mini will be shown again with the launch of the low cost iPhone.
The analysts believe that Icahn’s calls for share buybacks could end up being destructive for Apple Inc. (NASDAQ:AAPL)’s shareholders. They note that there was initial excitement about Icahn’s investment into the company and his push for Apple to speed up its five-year share buyback program. However, the company already bought back $16 billion worth of shares between April and June, setting an annualized pace of $64 billion worth of shares.
In addition, returns on these investments depend on Apple Inc. (NASDAQ:AAPL)’s future earnings and the price at which the company buys back its shares. “Beyond a certain point, buybacks are inevitably value destructive,” the analysts wrote.
They downgraded the stock because of the run-up in share price ahead of iOS 7 and the new iPhone. They said Apple shares are now priced about 25 percent over their derived fair value of the company according to a sum of the parts.