No real upside and risks piling up. Apple’s (NASDAQ:AAPL) next earnings report could be a trap. You’re holding a stock priced like a rocket ship, but guess what? The fuel tank is almost empty. Here’s the hard truth: Apple is no longer the investment no-brainer it used to be. The numbers, the politics, and the current tech narrative all scream the same thing. So if you’re still clinging to Apple for “safety” or “stability,” you might want to sit down for this.
It’s a hard decision to remove something like Apple from your portfolio. We get it. But portfolio decisions have to be objective, and we take that to heart in our High-Quality portfolio, which has outperformed the S&P 500 and achieved returns greater than 91% since inception.
The Tariffs Are Coming And They’re Locked On Apple
Apple doesn’t just manufacture in China – it lives there. China accounts for 80% of Apple’s production capacity and nearly 90% of iPhones are made in Chinese factories. So when the U.S. slaps tariffs on Chinese imports – that’s a direct punch to Apple’s bottom line.
What’s Apple doing about it? Scrambling. Shipping phones via charter flights to dodge costs and ramping up India and Brazil production. But that’s probably years from being a real solution.
This isn’t just a dent. It’s a structural blow to Apple’s cost efficiency and pricing power. And it’s going to show up in the numbers very soon.
You’re Paying Growth-Stock Prices for Utility-Level Performance
Let’s not sugarcoat this: Apple is expensive at 30x PE
- Last year’s revenue growth? Under 3%
- Free cash flow yield? Under 3%.
- Dividend? Under 3%? Well no, actually Zero!
No doubt it is a great company with a great product, high margins and tons of cash. That’s more like a retiree who has done well in life – not the young innovator it used to be. You’re buying Apple at a premium for being what? Safe? Stable? Newsflash: the volatility of Apple stock has been 50% higher than the S&P 500 since 2021. That “safe haven” idea? It’s a myth. And it’s probably going to cost you in the long run.
The Earnings Might Be Fine, But Guidance Could Be Ice Cold
Sure, Apple might beat expectations this quarter. Maybe. But the real danger is what comes next – forward guidance. Don’t believe us? Here is what others are saying.
Wall Street already smells blood. Morgan Stanley cut its price Target for Apple. Reasons? Tariffs. Supply chain pain. And here’s a kicker – Apple’s AI strategy is falling behind. Bernstein believes EPS could drop by up to 19% if Apple doesn’t pass on costs to customers, and Jefferies thinks gross margins could shrink by up to 6.7% wiping 10% off valuation.
When guidance drops, the stock’s premium is going to collapse.
But It’s Apple! Doesn’t That Count for Something?
Of course it does. It’s a trillion-dollar brand. It has loyal customers and a boatload of cash.
But you don’t buy stock just because it’s a household name. You buy it because it’ll grow, or it’ll pay you. Right now, Apple is doing neither, and you’re paying a huge premium for the privilege.
In uncertain markets, yes, great companies can attract premium valuations as investors panic-shop for “safe” bets. But let me ask you this: Do you want just safety – or do you want upside too to go along with it? Look, this isn’t 2010 Apple. The “iPhone boom” isn’t coming back. But consider this portfolio approach where you not only get safety by diversifying away stock-specific risks but also exposure to the upside – Trefis High Quality (HQ) Portfolio. With a collection of 30 stocks, this portfolio has a track record of comfortably outperforming the S&P 500 over the last 4-year period. Why is that? As a group, HQ Portfolio stocks provided better returns with less risk versus the benchmark index; less of a roller-coaster ride as evident in HQ Portfolio performance metrics.
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