The fact that Carl Icahn taught Apple Inc. (NASDAQ:AAPL) CEO Tim Cook “financial engineering” has made Bert Dohmen bearish on the stock for the short term.
Dohmen, founder and president of Dohmen Capital research, described in a CNBC interview that the company’s strategy regarding stock buybacks is “financial engineering”. This strategy has, he said, made him positive about the stock in the short term.
“I like it short term only because of the financial engineering. The company is buying huge amounts of its stock back in order to benefit the big shareholders and the executives who have stock options. That reduces the float and therefore makes the earnings look much better – the earnings per share are increased,” Dohmen said.
He said that Apple Inc. (NASDAQ:AAPL) – which makes the iPhone, still the best-selling smartphone in 2014 so far – should be strong at the tail end of the year because this is the quarter when most companies do their stock buybacks.
Nonetheless, the picture is not as rosy for the tech giant in the long term if Dohmen is asked. Echoing thoughts shared before by industry insiders, Dohmen then went on to explain his pessimism about the iPhone maker in the years to come. He said that Apple is “losing market share like crazy.”
“It’s becoming a one-trick pony. It’s a phone company. Look at all the products it had before. The iPod is basically gone. The iPad is losing market share – one year ago, market share was 40%, now the market share is around 32%. That’s a plunge of 19%. Even iPhone sales in the U.S. this year are down 3.3% in market share. In Japan, market share of the iPhone is down 15.9%. These are huge declines,” he said.
Furthermore, he said that he is not in the red with his bearish bet on Apple Inc. (NASDAQ:AAPL), which he said was two years ago. Dohmen said that he recommended selling the stock after it peaked at $705. The stock eventually hit the $420 price target the executive set.
Dohmen said that he then turned bullish on Apple two years ago when its CEO, Tim Cook, met with Carl Icahn, the leader of Icahn Capital Lp, because Icahn “will have taught [Cook] about financial engineering: which he did.”
Ken Fisher’s Fisher Asset Management is an Apple Inc. (NASDAQ:AAPL) shareholder. The firm reported owning about 10.74 million shares in the company by June 30.