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Value Advisory founder Howard Rosencrans and Capital Advisory managing director Channing Smith give their outlook for Apple stock.
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We'll speak of apple.
The roller coaster ride actually down for shareholders of this company dreaming -- -- -- advisory founder Howard Rosen -- Channing Smith managing director of equities -- the capital advisors and Howard.
You say that this company is not only in trouble.
But iphones are gonna be their downfall he mean by that.
Well I can't account for over 70% -- their profitability.
Call -- the other dominant operating system the android license is everybody said that no matter.
How deep apples we sources talk everybody in the world this coming after and everybody's looking at 506070%.
Gross margins that are.
Absolutely unsustainable sales growth it's been incredible a number two market cap and Google itself at the end of the year is gonna start producing their own phones.
Google doesn't need this to be the singular profit engine.
You know we're looking at the stock performance and not just -- today but you gotta look over the last year I mean you know look at this Janet.
January.
Best month.
Since -- -- a seven for the S&P 500 apple the worst stock performance of the S&P 500 yet you're saying.
Hey great buying opportunity why.
Well look I mean every technology -- I agree prices are gonna come down margins are gonna come down this is typical -- every technology cycle we oversee.
We're in the midst of that right now so there's going to be every -- we -- during that right now but the stock is ridiculously cheap you know ten times.
-- time to take out the cash here's a company that's got a return of capital on the high twenties I was in the thirties for the last year.
It's a company that has a huge install base -- Apple's not going away.
But he still -- markets are going you think it margins going from forty to 35 they go for forty -- forty this is hardware company.
The -- -- gonna get down and that's typical of the question is why -- gross margins get down last year.
I would argue that what you've seen as the greatest.
Product introduction.
Reinvigorate -- of their products that we've seen in a long long time so we actually expect gross margins go up okay.
Once slid down the road to with three years.
Look at their major customers and major customers absolutely hate that the major customers or not you would meet the major customers on the phone companies the phone companies paid -- 600 box.
-- -- for 200 they lose 400 upfront and they sell any other Droid phone.
This Samsung's they -- a couple hundred dollars to everybody else they lose a lot less or may lose nothing over the next few years.
It's already a mature market there is no reason that they're gonna dominate this world is no reason -- a phone companies are gonna continue to pay them and a great the ransom is -- -- Well I mean -- they sold almost 49 million iphones.
During the quarter that was stopped from 38 million so there's obviously people still buying -- funds.
And if you do the simple math it's obvious that it's not just two or 3% growth which you would see typically in a mature market.
So the numbers right there alone kind of -- -- your theory you look at ipads 22 million was sold the fourth quarter up from fifteen.
And look at the industry numbers I mean you're saying it's mature -- -- number for tablets they expect this market to triple over the next.
Bring your profitability it's completely flat despite the despite the huge bump in sales people -- ready got 75%.
Of the US market.
Whose gonna want to buy this stock when the earnings in the margins are going like this.
And look -- -- earnings organic and -- in the rate that we've seen is gonna come down.
The question is how quickly is that gonna come down.
And when investors -- thing in his own my god apples just gonna collapse that is not the case we're still seeing enormous category growth.
Earnings will be fine they're gonna come down -- what that's natural question is at eight times or ten times whatever metric you -- years.
Is that reflective of Apple's growth opportunities of a company that should -- earnings fifteen to 20% -- yeah I mean.
You know it's almost like having incentives and -- it's almost like -- by apple and short the NASDAQ at this point but I think to Howard's point of the same time -- nearly us two billion dollars in market cap 200 billion skews meat market valuation with the stock.
Fall that we have seen it's all about the valuation Channing Howard -- thanks about that -- appreciate it except.
