Apple Inc. (AAPL): Bear Case Presented by Ian Dogan on CNBC

In the ‘Earnings Central’ program on CNBC on Tuesday, the Research Director & Cofounder at Insider Monkey, Ian Dogan, together with John Buckingham, the CIO at Al Frank Asset Management, debated whether Apple Inc. (NASDAQ:AAPL) has a potential in the long run and where the company might be headed based on the recently released financial statements. While, Mr. Buckingham stated that Apple is performing very well in terms of earnings, Mr. Dogan considers that Apple Inc. (NASDAQ:AAPL)’s products and markets are maturing, which could lead to a decline in sales.

Apple Inc. (NASDAQ:AAPL)

Mr. Buckingham considers that the excellent results showed by Apple in terms of a net profit of $7.7 billion, show that the company is in a strong financial situation. Moreover, Apple Inc. (NASDAQ:AAPL) is capable of generating a strong cashflow and it is using its cash to return money to shareholders through dividends and stock buyback programs. In addition, Apple can borrow money at low rates.

“It used to have a reasonable valuation, with P/E at 15. You have great new products that are on the way, at least that’s what we think. [...] Very innovative company, very innovative products and very reasonable valuation, I think you want to continue to hold it,” Mr. Buckingham added.

On the other hand, Ian Dogan thinks that Apple Inc. (NASDAQ:AAPL) might experience a decline in sales of its products. While he still likes the stock for the short-term, in the long-run, Apple’s products and the markets it is involved in are maturing. To support this idea, Mr. Dogan pointed out that Apple’s iPad sales have peaked last year, and in the first six months of 2014, they declined by around 15%, which is a huge amount.

“The other thing is, this quarter its sales went up 6%, but that’s mostly because of the increase in Chinese sales. When you look at Americas, the sales went up by only 1%, and that’s despite the fact that Apple’s sales were performing extremely well in Brazil. If you exclude South America, probably North America, Apple’s sales were declining as well,” Mr. Dogan said.

Moreover, Mr. Dogan added that Apple Inc. (NASDAQ:AAPL)’s margins are not sustainable and will decline and Apple’s stock might decline to $50 or even $40 in the long-term. However, the Research Director at Insider Monkey has a six-month target price for Apple at $100, which supports his idea for the short-term value of the stock.

One a side note, Apple Inc. (NASDAQ:AAPL) has posted revenue of $37.43 billion for the third quarter of the fiscal year 2014, which was slightly below the estimates of $37.99 billion. The gross margins have appreciated to 39.4%, from 36.9% a year ago, and topped the estimates. The EPS of the company amounted to $1.28 in the third quarter, versus the estimate of $1.23 and $1.07 reported for the same period of last year.

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